Lee v. State Tax Commission of Alabama

• Decision Date: 06 June 1929
• Docket Number: 3 Div. 903.
• Parties: LEE v. STATE TAX COMMISSION OF ALABAMA ET AL.
• Court: Alabama Supreme Court

123 So. 6

219 Ala. 513

LEE v. STATE TAX COMMISSION OF ALABAMA ET AL.

3 Div. 903.

Supreme Court of Alabama

June 6, 1929

Appeal from Circuit Court, Montgomery County; Walter B. Jones Judge.

Petition of Alonzo H. Lee for mandamus to Henry S. Long and others, as chairman and associate members of the State Tax Commission of Alabama. From a judgment denying relief, petitioner appeals. Reversed and remanded.

Sayre Bouldin, and Brown, JJ., dissenting.

John S Coleman, S. M. Bronaugh, and Bradley, Baldwin, All & White, all of Birmingham, for appellant.

Charlie C. McCall, Atty. Gen., for appellees.

THOMAS J.

The case was tried on an agreed statement of facts, and respondents filed a plea of general issue denying the allegations of the petition. The judgment was for the respondents, and the writ of mandamus denied.

The subject of classification for the purpose of taxation has been often discussed by the courts. Warrior Water Co. v. Long, 218 Ala. 125, 117 So. 656. It is agreed that a taxing statute is not void if the classification employed is reasonable and in its application it does not offend the requirements for equality and uniformity. Ph nix Carpet Co. v. State, 118 Ala. 143, 22 So. 627, 72 Am. St. Rep. 143; State v. Ala. Fuel & Iron Co., 188 Ala. 487, 66 So. 169, L. R. A. 1915A, 185, Ann. Cas. 1916E, 752; State v. Kidd, Ex'r, 125 Ala. 413, 28 So. 480; Kidd v. State of Alabama, 188 U.S. 730, 23 S.Ct. 401, 47 L.Ed. 669; Soon Hing v. Crowley, 113 U.S. 708, 5 S.Ct. 730, 28 L.Ed. 1145.

Has it been declared that the state may exempt securities of foreign corporations owned by residents of this state from ad valorem taxation and exact in lieu thereof a privilege tax for recordation notice of ownership? State v. Kidd, 125 Ala. 413, 28 So. 480; Ph nix Carpet Co. v. State, supra; R.I. & S. Co. v. State, 204 Ala. 469, 86 So. 65; American Sugar Refining Co. v. Louisiana, 179 U.S. 89, 21 S.Ct. 43, 45 L.Ed. 102; International Harvester Co., etc., v. State of Missouri, 234 U.S. 199, 34 S.Ct. 859, 58 L.Ed. 1276, 52 L. R. A. (N. S.) 525.

The distinction between property and excise taxes is recognized. 1 Cooley on Tax. pp. 132, 133. The tax levied under the provisions of sections 44 to 52 of the Revenue Act of 1927 (Acts 1927, pp. 139, 174-176), is an excise or license tax and not a property tax. Long, Judge, v. Jasper Land Co., 217 Ala. 593, 117 So. 210; Garrison v. Hamlin, 215 Ala. 39, 109 So. 106; Hamilton v. Williams, 214 Ala. 89, 106 So. 500; State v. Stiles, 212 Ala. 468, 102 So. 901; State v. Ala. F. & I. Co., 188 Ala. 487, 66 So. 169, L. R. A. 1915A, 185, Ann. Cas. 1916E, 752. The former is an indirect tax, and as such is not subject to the several limitations contained in sections 211 and 217 of the Constitution. Exchange Drug Co. v. State Tax Com., 218 Ala. 115, 117 So. 673; Ph nix Carpet Co. v. State, 118 Ala. 143, 22 So. 627, 72 Am. St. Rep. 143; State v. Ala. F. & I. Co., supra; Barnes v. Moragne, 145 Ala. 313, 41 So. 947; Crosland, Judge, v. Federal L and Bank, 207 Ala. 456, 93 So. 7; Flint v. Stone Tracy Co.,

220 U.S. 107, 31 S.Ct. 342, 55 L.Ed. 389, Ann. Cas. 1912B, 1312; 1 Cooley on Tax. pp. 132, 133, 146; Oliver Iron Mining Co. v. Lord, 262 U.S. 172, 43 S.Ct. 526, 67 L.Ed. 929; 37 C.J. 172; Roberts & Schaefer Co. v. Emmerson, 271 U.S. 50, 46 S.Ct. 375, 70 L.Ed. 1154. This court has sustained the right of issue of nonpar stock by corporations. Randle v. Winona Coal Co., 206 Ala. 254, 89 So. 790, 19 A. L. R. 118, 131; 36 A. L. R. 791; 45 A. L. R. 1501. Is the difference between such stock and that with stated par value a substantial difference on which to base a taxation classification? The difference between new public utility that is being constructed for the first year's business, and that taking over an old and a going public utility, was the basis for classifications and for differing license taxes, and held not arbitrary or unreasonable, Warrior Water Co. v. Long, 218 Ala. 125, 117 So. 658; and the taxation of shares of stock of foreign corporations and not that of shares of stock of domestic corporations is the subject of discussion in Kidd v. State, 188 U.S. 730, 23 S.Ct. 401, 47 L.Ed. 669.

This power as a proper selection of the objects and classifications for taxation, within the required limitations, is thus stated by Mr. Chief Justice Brickell in Ph nix Carpet Co. v. State, 118 Ala. 143, 152, 22 So. 627, 628 (72 Am. St. Rep. 143), as follows: "The equality and uniformity consists in the imposition of the like tax upon all who engage in the avocation, or who may exercise the privilege taxed; and if it be a franchise tax, upon all corporations belonging to the class upon which it is imposed. 1 Desty on Taxation, § 36; Cooley on Taxation (2d Ed.) 378; Delaware Railroad Tax, 18 Wall. 206 ; City of New Orleans v. Kaufman, 29 La. Ann. 283 ; Durach's Appeal, 62 Pa. 491. The General Assembly in the legitimate exercise of the taxing power, may impose direct taxes on lands only, to the exclusion of every variety or species of personal property; or, it may not tax lands, and subject personal property only to direct taxation. This is within the general grant of the power of taxation, which of necessity involves the power of selecting that property or species of property which in the judgment of the legislature is the better able to bear the burden of taxation. And, as is said by Judge Cooley, 'What is true of property is true of privileges and occupations also; the State may tax all, or it may select for taxation certain classes and leave the other untaxed. Considerations of general policy determine what the selection shall be in such cases, and there is no restriction on the power of choice unless one is imposed by the Constitution.' Cooley on Taxation, 570. Corporations are of every character and variety; have grown to be almost as various and diverse in their franchises, as are the avocations or pursuits of natural persons."

We shall indicate that the result is that the state may tax such property as it sees fit, and exempt other property, so long as no arbitrary classifications result in the subjects taxed and those made the subject of exemptions; that the state can levy an ad valorem tax on securities of domestic corporations and exempt securities of foreign corporations owned by residents in this state, or it can exempt such foreign securities from all ad valorem taxation and levy an excise or privilege tax in lieu thereof. This was stated conversely in the case of Kidd v. State, 188 U.S. 730, 23 S.Ct. 401, 47 L.Ed. 669, as follows: "The equal protection of the laws is not denied by the provisions of Ala. Code 1886, § 453, cl. 13, and Code 1896, § 3911, cl. 14, for the taxation of railroad stock, because of the exemption of stock in domestic railroads and in others that list substantially all their property for taxation."

And in American Sugar Ref. Co. v. Louisiana, 179 U.S. 89, 94, 21 S.Ct. 43, 45, 45 L.Ed. 102, 104, these words are employed:

"In Pembina Consol. Silver Min. & Mill. Co. v. Pennsylvania, 125 U.S. 181, 8 S.Ct. 737, 31 L.Ed. 650, 2 Inters. Com. Rep. 24, it was decided that the equal protection clause did not prohibit a state from requiring, for the admission within its limits of a corporation of another state, such conditions as it chooses, though in that case it exacted a license tax from such corporations, which it did not exact from corporations of its own creation. In Missouri P. R. Co. v. Mackey, 127 U.S. 205, 8 S.Ct. 1161, 32 L.Ed. 107, it was said that this clause did not forbid special legislation, 'and when legislation applies to particular bodies or associations, imposing upon them additional liabilities, it is not open to the objection that it denies to them the equal protection of the laws, if all persons brought under its influence are treated alike under the same conditions.' To the same effect is Walston v. Nevin, 128 U.S. 578, 9 S.Ct. 192, 32 L.Ed. 544.

"The power of taxation under this provision was fully considered in Bell's Gap R. Co. v. Pennsylvania, 134 U.S. 232, 10 S.Ct. 533, 33 L.Ed. 892, in which it was said not to have been intended to prevent a state from changing its system of taxation in all proper and reasonable ways. It may, if it chooses, exempt certain classes of property altogether; may impose different specific taxes upon different trades or professions; may vary the rates of excise upon various products; may tax real and personal estate in a different manner; may tax visible property only, and not securities; may allow or not allow deductions for indebtedness. '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.' See also Home Ins. Co. v. New York, 134 U.S. 594, 10 S.Ct. 593, 33 L.Ed. 1025, St. Louis, I. M. & S. R. Co. v. Paul, 173 U.S. 404, 19 S.Ct. 419, 43 L.Ed. 746."

We are thus informed by the Supreme Court of the United States that the state, in dealing with the securities of foreign corporations, may classify the same differently from local securities; that an ad valorem tax can be levied on the one species, and the other class exempt without offending the Federal Constitution. And it results that there was likewise the right, as to such classes or classifications of securities, to exempt the one from ad valorem taxation and levy in lieu thereof an excise or privilege tax for the recording of notice of ownership of the same.

The subject of subclassification was undertaken by the Legislature in dealing with the securities of any foreign corporations (section 44, Revenue Act), contained in sections 51(a, d) and 52 of the Revenue Act, and in the imposition of the privilege...