Monaghan v. Seismograph Service Corp.

• Decision Date: 09 February 1959
• Docket Number: No. 40987,40987
• Citation: 108 So.2d 721,236 Miss. 278
• Parties: Noel MONAGHAN, Chairman, State Tax Commission, v. SEISMOGRAPH SERVICE CORPORATION.
• Court: Mississippi Supreme Court

Page 721

108 So.2d 721

236 Miss. 278

Noel MONAGHAN, Chairman, State Tax Commission, v. SEISMOGRAPH SERVICE CORPORATION.

No. 40987.

Supreme Court of Mississippi.

Feb. 9, 1959.

John E. Stone, Jackson, for appellant.

Henley, Jones & Henley, Jackson, Joseph L. Hull, Jr., Tulsa, Okl., for appellee.

McGEHEE, Chief Justice.

This suit was filed by the appellee, Seismograph Service Corporation, incorporated under the laws of Delaware and having its principal office and place of business at Tulsa, Oklahoma, where it was maintaining such office and place of business during the taxing period in question in this case. The suit was filed against the Chairman of the State Tax Commission under the authority of Section 10124, Miss.Code of 1942, Recompiled, which provides, among other things, that 'Any person improperly charged with any tax imposed by this act, and required to pay the same, may recover the amount paid together with interest, in any proper action or suit against the commissioner for the amount paid into the State Treasury * * *' The Act is known as the Sales Tax Law of this State but the same covers tax on compensation received for services rendered therein.

The incidence of the tax is upon the local activity and the protection afforded that activity by the laws of this State. While the tax in this case was originally predicated upon Section 10111, Miss.Code of 1942, Recompiled, which provides for a tax equal to 2% of the gross income of the business done in this State, the assessment herein was actually made under Section 10110 of the Miss.Code of 1942, Annotated, which provides a lesser rate of tax. Of course no point is made by the appellee-taxpayer on the specific ground that it was charged a tax at the rate of 1% on the assessment under the latter statute instead of 2% under said Section 10111.

Section 10111, Miss.Code of 1942, Recompiled, provides in part, as follows: '(1) Upon every person engaging or continuing within this state in any of the following businesses, there is likewise hereby levied and shall be collected a tax on account of the business engaged in equal to two per cent of the gross income of the business: * * * Services performed in connection with the surveying, exploring, developing, producing, distributing or testing of oil, gas, and other mineral resources, not elsewhere taxed.'

The appellee Seismograph Service Corporation was, during the taxing period in question, engaged in the making of seismographic surveys, with considerable equipment and personnel for the gathering of data for the location of oil and gas in Mississippi under written contracts with the California Company of New Orleans, Louisiana, the Gulf Oil Corporation of Houston, Texas, the Marshall Young Company of Fort Worth, Texas, and the Skelly Oil Company of Tulsa, Oklahoma, and in which written contracts the oil company is referred to as the 'Client'. The appellee Seismograph Service Corporation, under the terms of the contract, was to furnish the scientific equipment necessary for the exploration of the area of land in this State designated by the client for the exploration, was to furnish the personnel for conducting the operation, and was to be reimbursed for only expendable material used in the seismographic survey, such as dynamite, etc.

The procedure in conducting the seismographic survey was for the appellee Seismograph Service Corporation to employ in the work what is called a 'Basic Unit' and a 'Drilling Unit', comprised of the equipment and personnel listed in exhibits to the written contract. The tax in question is based upon the gross receipts paid to the appellee by the clients for the work done by these two units in this State, which corresponded with the amount of income reported by the appellee Seismograph Service Corporation to the State Tax Commission for the period in question.

It was frankly admitted by the President of the Seismograph Service Corporation in his testimony at the trial that no charge as such was made in any of the invoices or mentioned in the contracts as to any services rendered outside of this State.

He referred to the scientific equipment used by the basic unit which included 'the recording truck, which is connected by cable to all the detectors laid out in a straight line on the ground.' He testified that 'Not too far away is the shooting truck, which is connected by telephone cable to the recording truck, and again an electric line goes from the shooting truck to the shot-hole for the detonation of the dynamite. And further that 'On word from the operator in the recording truck the shooter pushes the blaster, and sets off the blast of dynamite.' He also told the court that the holes were drilled by the drilling unit to a depth of about sixty feet, that the hole was about four inches in diameter, and that the dynamite was placed at the bottom of this hole. The basic unit was comprised of a party chief, two computers, a party chief's car, and all necessary calculating, drafting and mapping equipment; that as a part of the crew there was an observer, assistant observer, a recorder's helper, a shooter and a shooter's helper; that the set of 24-trace seismic recording instruments included not more than fifty geophones, mounted on a standard truck, a water tank and all normal shooting accessories mounted on a standard truck; that the surveying unit consisted of a surveyor, rodman, a service automobile and a complete set of surveying instruments; and a list of the equipment and personnel of a drilling unit was also attached as an exhibit to one of the contracts which was introduced as being typical of all of the contracts involved between the Seismograph Service Corporation and its clients. He admitted that the work done in this State was by the basic and drilling units, and that what the appellee got out of the field operation were the surveyor's notes, the surveyor's map of the locations, the observer's report of his records, the shooter's report as to the amount of dynamite he shot, and that the field crew would make certain preliminary calculations and computations and a preliminary progress map, and that all of the information, maps and surveys were then mailed to the home office at Tulsa, Oklahoma, where there was a pool of expert geologists and geophysicists who interpreted the results of the data gathered by the basic units and the drilling units in Mississippi.

As required by the written contract, the appellee would then make a report to the client as to their interpretations of the results of the work done in Mississippi by the basic unit and the drilling unit.

The President of the appelle-corporation, Mr. G. S. Wesby, further testified, among other things, as follows: 'Q. Now, Mr. Wesby, as a matter of practice in your experience with your company, has the company ever set a separate fee for the field work and for the interpretation work? A. No, it has not.' and further: 'Q. Now, your basic unit confines its work to the shooting of the holes on location and to the correct preparation of preliminary maps, as you say--A. That's correct. Q. In their surveying, do they not? A. That's correct. * * * Q. Now, that drilling unit also is a unit that is on location (evidently meaning in the area assigned to the appellee for seismographic exploration in Mississippi) and drills the holes in which the dynamite is placed for detonation, is it not? A. That's correct. Q. Both the basic unit and drills units are used at work on location, are they not? A. That's correct.'

Mr. Wesby was also asked: 'Q. Under that provision of the contract you charged for the basic unit $8,200 a month, did you not? A. Yes, sir. Q. And under that contract you charged for the drill unit in accordance with the charges as stated in schedule (b) of the contract, did you not? A. That's correct. Q. And that was the only charge you made under that contract for services, were they not? A. Yes, sir. Q. There was no charge made for any interpretative work, was there? A. The interpretative--Q. As such? A. As set out in an invoice? Q. As set out in the contract? A. The basic fee covers the interpretation. Q. Let me ask you my question again. There is no charge as such for interpretation work in the--on the face of the contract, is there, Mr. Wesby? A. No, that's correct. * * * Q. All right, show me some place else in the contract where there are charges made for other work. A. No, there are no other charges but they are obligations that we--Q. I know--They were covered by these fees * * * Q. I am asking you the question on the face of the contract, are there any other charges made other than those for the basic unit and the drill unit? A. No, sir. Q. Now, both the basic unit and drill unit are units that operate locally, are they not, Mr. Wesby? A. That's correct.' The witness, however, further stated: 'It has grown up in the seismographic industry from the very beginning that there are two parts in the seismographic survey that I have mentioned, that is, going out and getting the physical data and then following it up by the interpretation. * * *'

Notwithstanding that the president of the appellee corporation contended that there are two parts of a seismographic survey, part of the work done in the field in Mississippi and the remainder, the interpretation in Tulsa, Oklahoma, of the data gathered in Mississippi, neither the written contract nor the invoices, which were present but not introduced, in connection with the seismographic survey in Mississippi disclose that any charge was made for the interpretative work done at the home office at Tulsa, Oklahoma. The tax was assessed on the basis of the income reported by the appellee to the State Tax Commission in Mississippi. Sec. 10120, Code of every person taxable under the Act duty of every person taxable under the Act to keep and preserve for a period of three years adequate records of the gross income, gross receipts or proceeds of sales of...