Nashville Tobacco Works v. City of Nashville

• Decision Date: 05 April 1924
• Citation: 260 S.W. 449,149 Tenn. 551
• Parties: NASHVILLE TOBACCO WORKS v. CITY OF NASHVILLE ET AL.
• Court: Tennessee Supreme Court

260 S.W. 449

149 Tenn. 551

NASHVILLE TOBACCO WORKS v. CITY OF NASHVILLE ET AL.

Supreme Court of Tennessee.

April 5, 1924

Error to Chancery Court, Davidson County; Jas. B. Newman Chancellor.

Suit by the Nashville Tobacco Works against the City of Nashville and others to enjoin collection of taxes. Decree for complainant in part, and it brings error. Affirmed.

J Washington Moore, J. Carlton Loser and Norman R. Minick, all of Nashville, for defendants in error.

COOK J.

This case involves the validity of an assessment by the city of Nashville of ad valorem taxes against the Nashville Tobacco Works, a domestic corporation engaged in the manufacture of tobacco within the city limits. Complainant submitted its schedule for assessment as of January 10, 1920, which showed paid-up capital $120,000 surplus and undivided profits $253,041.58, making a book value of $373,041.58.

By section 22, c. 602, Acts of 1907, each manufacturing corporation is required to pay ad valorem taxes upon the actual cash value of its capital, less the value of the real estate directly assessed and all tax exempt property. Observing the requirements of the act, the city assessor determined the actual cash value of the corporate capital to be $331,410, $41,631 less than book value, and deducted the assessed value of the real estate $26,750, $1,000 exemption allowed to all taxpayers, the value of United States bonds and revenue stamps $3,757, and the value of manufactured articles on hand, $63,989, making a total deduction of $95,496, from the value of the corporate capital, leaving $235,000 as the assessed value of the corporate capital subject to ad valorem taxes. The company protested the assessment claiming a deduction of $303,978.45 for leaf tobacco on hand, all of which it insists is exempt from taxation under the provisions of the Constitution hereinafter mentioned.

The tax assessor and board of equalization refused to allow the additional exemption claimed, whereupon the complainant refused to pay the tax assessed against it, and filed the bill to enjoin collection by the city. The claim to the additional exemption is urged upon the ground that the tobacco on hand is exempt from taxation under our Constitution and statutes.

Article 2, § 28, of the Constitution provides that the Legislature may exempt from taxation "the direct product of the soil in the hands of the producer, and his immediate vendee." Article 2, § 30, of the Constitution provides that "no article manufactured of the produce of this state, shall be taxed otherwise than to pay inspection fees."

Chapter 602, Acts of 1907, § 2, subsec. 5, embodying the foregoing sections, provides that "the direct product of the soil of this state, in the hands of the producer or his immediate vendee and manufactured article from the produce of this state in the hands of the manufacturer," shall be exempt from taxation.

Upon a review of the assessment, the chancellor found that complainant held 84,820 pounds of leaf tobacco as the immediate vendee of the producer, but that the remainder was subject to taxation. Assignments of error present the inquiry of whether or not the complainant is entitled to additional exemptions for tobacco in its possession at the date of assessment by the city tax assessor.

Sections 28 and 30 of article 2 of the Constitution and chapter 602, § 1, subsec. 2, Acts of 1907, contemplate two classes of commodities as exempt from taxes: (1) The direct product of the soil in the hands of the producer or his immediate vendee; and (2) articles manufactured of the produce of this state. After the product of the soil has passed from the hands of the producer or his immediate vendee, it is not exempt from taxation under section 28, supra. Before the conversion into an article of manufacture or until the artisan actually begins the process of manufacture, neither the product of the soil nor the produce of this state are exempt from taxation under article 30, supra.

If the tobacco was in complainant's possession as the immediate vendee of producers in the states of Tennessee and Kentucky that portion produced in Tennessee would be exempt under article 2, § 28, of the Constitution and chapter 602, § 2, Acts of 1907, and the federal Constitution would forbid taxation of the other portion which passed in the channels of interstate commerce from the Kentucky producer to complainants in Tennessee. No state can discriminate unfavorably in its taxing laws against the produce of another state. Where articles manufactured from the produce of this state are exempt from taxation under our taxing statutes, such articles from another state would likewise be exempt, for the state cannot, in its taxing statutes, discriminate against the products of another state in favor of the products of its own citizens. Such discrimination is forbidden by the commerce and equal rights clause of the federal Constitution. Darnell v. Memphis, 208 U.S. 115, 28 S.Ct. 247, 52 L.Ed. 413.

On January 10, 1920, complainant had on hand 1,297,964 pounds of leaf tobacco valued at $302,978.45 in hogsheads, stored in the Price-Bass warehouse and in the factory. All of this tobacco, except 84,820 pounds, was acquired from the American Tobacco Company, and was held "awaiting to be converted into manufactured products" as shown by the testimony of Mr. Le Sueur, manager of the complainant company.

The books of the company show the quantity of tobacco carried on "Leaf Department account" 1,239,695 pounds, value $287,608.93, and "Leaf account in factory," value $16,369.52. While the record is not clear, it may be inferred that the tobacco under the account of the leaf department is that stored in the Price-Bass warehouse. It appears that the quantity on hand was not...