Missouri, K. & T. Ry. Co. v. Meyer

• Decision Date: 25 January 1913
• Docket Number: 513.
• Citation: 204 F. 140
• Parties: MISSOURI, K. & T. RY. CO. v. MEYER, State Auditor of Oklahoma.
• Court: U.S. District Court — Western District of Oklahoma

204 F. 140

MISSOURI, K. & T. RY. CO. v. MEYER, State Auditor of Oklahoma.

No. 513.

United States District Court, W.D. Oklahoma.

January 25, 1913

Clifford L. Jackson, W. R. Allen, and M. D. Green, all of Muskogee Okl., and C. G. Hornor, of Guthrie, Okl., for plaintiff.

Charles West, Atty. Gen., of Guthrie, Okl., for defendant.

COTTERAL District Judge.

This suit was brought by the railway company to obtain a decree enjoining the collection by the State Auditor of gross revenue taxes imposed upon receipts derived from its railway operations under the laws of the state found in sections 2 and 3 of the act of May 26, 1908, Session Laws 1907-08, pp 640, 641, forming sections 7702 and 7703 of Snyder's Compiled Laws of 1909, and upon receipts from coal mined and produced by the company in the state, under section 6 of the same act, and under that section as amended by act of March 27, 1909 (Laws 1909, c. 38, art. 2), forming section 7706 of Snyder's Compiled Laws.

A general demurrer to the bill was heretofore overruled. The taxes upon the gross railway receipts are conceded to be invalid under the decision of the Supreme Court, in Meyer, Auditor, v. Wells Fargo & Co., 223 U.S. 298 32 Sup.Ct. 218, 56 L.Ed. 445, and must be enjoined in the final decree. The remaining controversy involves the taxes claimed on receipts from coal production. Upon leave given the defendant has demurred to a portion of the bill, and filed an answer to the residue, relative to that subject. The answer admits that the coal is not taxable 'in place,' but alleges that it becomes so on severance, and justifies the law as 'a fair and reasonable method of establishing the property rights of plaintiff both in the severance and mining of such coal, and in the property rights so acquired and thus subjected to taxation,' and not otherwise taxed, and denies the averment of the bill that all of plaintiff's property was assessed at full cash value. The case is now submitted on said demurrer and exceptions to the answer.

Section 6 of the act of May 26, 1908, requires every person, firm, or corporation engaged in the mining, or production, within the state, of coal or asphalt, or of ores, to file quarterly reports with the State Auditor, showing the location of each mine, or oil or gas well, the kind of product, the gross amount produced, actual cash value, and other information, and at the same time to pay to the State Treasurer a gross revenue tax in addition to ad valorem taxes upon mining, oil, or gas property equal to 2 per centum of the gross receipts from the total production of coal therefrom, or one-half of 1 per centum for the total production of ores, etc.

The amended section, adopted March 27, 1909 (section 7706, Snyder's Compiled Laws), differs in changing the quarterly periods and fixing the tax on receipts from coal productions at one-half of 1 per centum. Further provisions of the section empower the Auditor to require additional information, examine books, etc., and compel the attendance of witnesses, and, in case of untrue or incorrect returns, ascertain the correct amount of gross receipts and compute the tax.

Section 7 of the former act (section 7707, Snyder's Compiled Laws) fixes the time of delinquency of the tax and penalties therefor, and, in case of failure of report, authorizes the Auditor to ascertain the amount and value of production, compute the tax, and add costs and penalties. Section 7a of the former act (section 7708, Snyder's Compiled Laws) authorizes a rebate of taxes when ores and minerals (not including coal) have been manufactured or refined in the state. Section 8 of the former act (section 7709, Snyder's Compiled Laws) provides for the collection of the tax by warrant. And section 7711 (Snyder's Compiled Laws), adopted March 27, 1909, provides that the funds be paid into the state treasury and credited to the general revenue fund of the state for the payment of the expenses of the state government.

The grounds of complaint mainly urged against these taxes are: (1) That the acts do not apply to coal production by the plaintiff, as it does not sell the coal, but uses it solely for its railway purposes. (2) That the acts are violative of section 57 of article 5, and section 19 of article 10, of the state Constitution. (3) That the tax is void as a burden upon interstate commerce. (4) That it is void because imposed upon rights and privileges conferred by the federal government.

1. With respect to the controversy as to the application of the law to coal mined and used by the railway company, no receipts being realized from sales, the rule of construction to be followed is that all the provisions relative to the matter should be harmonized and given effect if that may be done consistently with the evident legislative intent. The tax purports to be laid upon a per centum of the 'gross receipts from the total production of coal,' and from these words standing alone a meaning might be extracted that only taxation based upon sales was contemplated. But the tax is payable by all persons engaged in the mining or production of coal, etc., and not in selling it. A sworn return is exacted showing the location of the mine or well, the kind, the gross production, actual cash value, and other information, and while the Auditor is, under the same section, authorized to ascertain the gross receipts and compute the tax, the next section empowers him to ascertain the amount and value of production, compute the tax, etc. And section 7708, in providing for a rebate of taxes when asphalt, ores, or petroleum, or other mineral, have been manufactured or refined, contemplates a tax irrespective of sale of the natural product and not dependent on the sale after it has been manufactured or refined. The intent, from the several provisions taken together, seems therefore manifest to provide for the collection of a tax, whether the mineral is put on the market, or used by the producer, and by the expression 'gross receipts from total production' to refer to equivalents in either case, and accomplish the object of obtaining revenues from all production of mineral, regardless of use. This conclusion appears to be necessary, notwithstanding the conceded principles that taxes must be imposed by law, and that the law should be construed favorably to the taxpayer and not extended by implication beyond its clear intent.

2. Section 57 of article 5 of the state Constitution limits legislative enactments to one subject expressed in the title, with certain exceptions, and requires amendments to be re-enacted and published at length, etc. In the case of Binion v. Oklahoma Gas & Electric Co., 28 Okl. 356, 114 P. 1096, the Supreme Court of the state expressly decided that both the acts of 1908 and 1909 here involved were in accord with that section; and by uniform authority the construction of the Constitution of a state by the Supreme Court thereof is controlling in this court.

Section 19 of article 10 of the state Constitution requires legislative acts to specify distinctly the purpose of taxes thereby levied, etc. In the case of Binion v. Oklahoma Gas & Electric Co., supra, it was said that, conceding the former act did not meet the requirements of section 19 of article 10, it seemed to have been permissible to cure the act by amendment. It was added, however, that it was not essential to determine whether the act in question was in violation of that section. But in the case of McGannon v. State (Okl.) 124 P. 1063, involving the act of May 26, 1908, imposing a tax upon inheritances, it was said by the state Supreme Court, of section 19 of article 10 of the Constitution, that 'it is intended to apply only to annually recurring taxes imposed generally upon the entire property of the state and not the kind of tax we are dealing with, which is a special tax,' and cases were quoted from applicable to the subject. The taxes here involved cannot be classified as 'annually recurring' or 'imposed generally upon the entire property of the state. ' They are dependent upon the discovery and production of mineral in particular localities, and for this reason the above section of the Constitution cannot be held to detract from the validity of the acts imposing them.

3. The contention that this tax constitutes a burden on interstate commerce thus invalidating it cannot be sustained. It is alleged that the plaintiff is an interstate carrier of goods passengers, and the mails, and that the coal is used in the interstate railway operations of the company. But the tax does not purport to be a charge upon transportation, or the receipts therefrom, and it is not seen how it is open to objection on the ground of interference...