Mann v. McCarroll, Commissioner of Revenues

• Decision Date: 26 June 1939
• Docket Number: 4-5615
• Citation: 130 S.W.2d 721,198 Ark. 628
• Parties: MANN v. MCCARROLL, COMMISSIONER OF REVENUES
• Court: Arkansas Supreme Court

130 S.W.2d 721

198 Ark. 628

MANN v. MCCARROLL, COMMISSIONER OF REVENUES

4-5615

Supreme Court of Arkansas

June 26, 1939

Appeal from Pulaski Chancery Court; Frank H. Dodge, Chancellor reversed.

Judgment reversed.

Burk Mann, Coleman & Riddick and Cockrill, Armistead & Rector, for appellants.

Jack Holt, Attorney General, Leffel Gentry, Assistant Attorney General, and Frank Pace, Jr., for appellee.

Daggett & Daggett, for interveners.

Lee Baker and Brickhouse & Brickhouse, amici curiae.

OPINION

BAKER, J.

In April of 1937, plaintiff Mann purchased in the State of Alabama, for use in his gin in Lee county, gin machinery and equipment, paying therefor, as we understand the complaint, a little more than $ 13,000. There was demanded of him, on the 10th day of May, 1939, by Z. M. McCarroll, Commissioner, a tax of $ 296.02, purported to have been levied under paragraph (F) § 4, act 154, p. 516, of the Acts of 1937.

In this suit the Rose City Cotton Oil Mill, a corporation, intervened and alleged that it was engaged in the business of processing cottonseed, manufacturing therefrom oil, meal, lint and other products. Its mill is located in Pulaski county. It was further alleged that McCarroll, as commissioner, proceeding under the same provision of said act 154, after an audit made on May 5, 1939, demanded of the intervener a tax on 209 articles purchased outside the State of Arkansas for use in its mill and being of the value of $ 27,237.58.

Interveners, W. H. and John C. Howe, partners, doing business under the name of Howe Lumber Company, of Wabash, Arkansas, filed their intervention and alleged that on the 22nd day of March, 1938, the 29th day of March, 1938, and the 9th day of December, 1938, the interveners purchased in the city of Memphis, Tennessee, 39 mules for which they paid in cash the sum of $ 5,160; that the mules were thereafter transported to their plantation in Phillips county, and have been continuously thereafter in said county and that they have been used in the cultivation, production and harvesting of crops planted and produced on their lands in the year 1938, and subsequent thereto. It is further alleged that the mules were duly assessed as personal property belonging to interveners in said county for the year 1938 and that the tax levied thereon has been paid. The commissioner, however, has notified these interveners that under said: § 4, sub-section (F) a tax in the sum of $ 103.02 was due the state on said mules.

They further alleged that they purchased, in July of 1937, from Hardwicke-Etter Company, f. o. b., Sherman, Texas, gin machinery and equipment of the value of $ 13,780.95, and that said machinery was transported and has been installed in their gin at Wabash, Arkansas; that in July, 1937, the interveners purchased from Fairbanks-Morse & Company, f. o. b., St. Louis, Missouri, an engine and boiler and certain equipment therefor, and transported the same to Wabash, Arkansas, paying therefor the sum of $ 9,850 for such equipment and that they paid to the State of Missouri two per cent. sales tax, levied thereon and that now they are charged, under said act 154, with the two per cent. tax.

The provision of said act 154, under which all this litigation has arisen, is as follows: (F) "Every person, as defined in this act, shall report to the Commissioner as a retail sale the use or consumption by him of anything on which the sales tax has not been paid under this act which would have been levied had it been sold at retail in this state, and shall pay the sales tax thereon.

It is alleged by the plaintiff and the interveners that the act does not in itself levy or impose a tax on the use or consumption of property, but on the contrary, that the levy of the tax was upon retail sales only and that if said provision of § 4 (F) is interpreted as a levy upon the use or consumption it is in contravention of § 11, art. 16 of the Constitution.

It is also alleged in effect that if the tax be treated as a sales tax upon the purchases made outside of the State of Arkansas it is a burden upon interstate commerce and in conflict with the commerce clause of the Constitution of the United States and is, therefore, void.

There is also an allegation that act 154 originated as bill No. 4 in the Senate of the State of Arkansas, on January 13, 1937; that it was passed on January 27, 1937, but that said Senate bill, on February 7, 1937, was amended in the House of Representatives by the addition or insertion of the questioned paragraph (F) of § 4, and then was returned to the Senate for further consideration and that thereafter, on February 10th, the Senate returned the bill to the house of representatives, where on February 12th the House again amended the bill by adding said paragraph (F) of § 4. On February 16th, said Senate Bill No. 4 was passed by the House as amended and on. February 18th the emergency clause was duly adopted and the bill as amended was returned to the Senate. On the 23rd day of February, 1937, the amendment thereto, which had been adopted by the House of Representatives, was duly approved and concurred in by the Senate, and on February 24th the Senate passed the Senate bill as amended and adopted the emergency clause thereto. Said bill thereupon became act No. 154 and was approved by the governor on February 26, 1937.

It is now contended that this provision or amendment, introduced and passed by both the House and Senate, is so much in conflict and contrary to the original purposes of the bill if given the construction contended for by the appellee, McCarroll, Commissioner, it is in violation of § 21, art. 5, of the Constitution of the State of Arkansas.

The prayer of the plaintiff and of the several interveners was that McCarroll, as Commissioner, be enjoined from attempting to collect the alleged tax, which it was asserted was an illegal exaction.

A demurrer was filed by the Commissioner of Revenues upon the ground that the complaint and several interventions did not state facts sufficient to constitute causes of action. This demurrer was sustained by the trial court, and plaintiff and interveners refusing to plead further, their several actions were dismissed and from this order and decree of dismissal they have prayed an appeal to this court.

We may say in the beginning of this discussion that the view we have taken of this case will make it unnecessary to discuss all of the several matters set forth in the complaints and interventions and dismissed by the trial court. We may, however, discuss some of these propositions to some extent, in order to clarify the respective contentions. Whether the so-called use tax is a property tax has received rather serious consideration, in view of some of our former decisions, and for such light as may be shed upon the present controversy by reason of the recent decision of the United States Supreme Court in the case of Henneford v. Silas Mason Co., 300 U.S. 577, 57 S.Ct. 524, 81 L.Ed. 814, wherein Justice CORDOZA, writing the opinion, said: "The privilege of use is only one attribute, among many, of the bundle of privileges that make up property or ownership. Nashville C. & St. L. Ry. Co. v. Wallace, 288 U.S. 249, 53 S.Ct. 345, 77 L.Ed. 730, 87 A. L. R. 1191, supra; Bromley v. McCaughn, 280 U.S. 124, 50 S.Ct. 46, 74 L.Ed. 226; Burnet v. Wells, 289 U.S. 670-676, 53 S.Ct. 761, 77 L.Ed. 1439. A state is at liberty, if it pleases, to tax them all collectively, or to separate the fagots and lay the charges distributively. Ibid. Calling the tax an excise when it is laid solely upon the use (Vancouver Oil Co. v. Henneford, 183 Wash. 317, 49 P.2d 14) does not make the power to impose it less, for anything the commerce clause has to say of its validity, than calling it a property tax and laying it on ownership."

We hope we will not be deemed unduly critical of the opinion of this most learned jurist when we suggest that in many instances a use tax upon property necessarily is a tax upon the property itself, and in all such matters our own Constitution must be the controlling factor.

No doubt, there is much good reason and common sense in the learned Justice's statement that a state is at liberty if it pleases to tax "the privilege of use as only one attribute, among many, of the bundle of privileges that make up property or ownership." He says that the state is at liberty if it pleases to tax them all collectively, or to separate the fagots and lay the charges distributively. No doubt, this is true as to certain classes of property, in some jurisdictions, but it may not be true as to other classes of property. For instance, in many classes of property the use of the property is the only material part or "fagot," so to speak, inherent therein. In such cases wherein the use of the property is the only element of property that gives it value then there is no refinement of reasoning whereby such use might be taxed without the tax being a tax upon the property itself and not upon some of its attributes. We are saying that a use tax is sometimes necessarily a property tax. No metaphysical distinction can serve any practical purpose to distinguish in such instances a so-called use tax from an actual property tax. This matter was discussed in regard to the so-called gasoline tax, nor do we recall a single case in which this court has upheld the tax on the use of gasoline itself. The material element of property in gasoline, if not its sole and exclusive element, is its use. At least, the one use by which it takes on value, when employed, destroys it. So its almost sole and exclusive use is its value, the property itself. This is true of practically all toilet goods, gun powder, dynamite, all solvents, chemicals, and lubricants used in mining...