Norfolk & W. Ry. Co. v. Field

• Decision Date: 03 December 1957
• Docket Number: No. 836,836
• Citation: 143 W.Va. 219,100 S.E.2d 796
• Court: West Virginia Supreme Court
• Parties: NORFOLK & WESTERN RAILWAY COMPANY, a Corporation, v. John A. FIELD, Individually and as Tax Commissioner of the State of West Virginia. C. C.

Page 796

100 S.E.2d 796

143 W.Va. 219

NORFOLK & WESTERN RAILWAY COMPANY, a Corporation, v. John A. FIELD, Individually and as Tax Commissioner of the State of West Virginia.

C. C. No. 836.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 18, 1957.

Decided Dec. 3, 1957.

Syllabus by the Court

1. Chapter 33 of the 1933 Acts of the Legislature, First Extraordinary Session, as amended, imposes on a railroad corporation a single annual tax on the exercise of the privilege of doing business in this State.

2. The annual tax imposed on railroad corporations by Chapter 33 of the 1933 Acts of the Legislature, First Extraordinary Session, as amended, is measured in part by Section 2 thereof and in part by Section 5 thereof.

3. A taxing statute, though valid on its face, may be invalid when applied to particular circumstances or conditions of a particular taxpayer.

4. To establish that a taxing statute, valid on its face, is so unreasonable or arbitrary as to amount to a denial of due process of law when applied in a particular case, the taxpayer must prove by clear and cogent evidence facts establishing unreasonableness or arbitrariness.

5. A state is denied the power to tax the privilege of a railroad corporation to engage in interstate commerce though such commerce is within the borders of the state.

6. Though a state may not tax the privilege of engaging in interstate commerce, a taxing statute may be valid if designed and having only the effect of requiring the taxpayer engaged in interstate commerce to pay a fair and reasonable proportion of the costs of the state government made necessary by the transaction of the interstate business within the borders of the state.

7. Though traffic commonly referred to as loop traffic is technically interstate commerce, it may, in certain or particular circumstances, be taxed as business done within the State to which it bears a special relation.

John P. Fishwick, James E. Carr, Roanoke, Ernest K. James, E. Glenn Robinson, Charleston, for plaintiff.

W. W. Barron, Atty. Gen., Henry C. Bias, Jr., Asst. Atty. Gen., for defendant.

GIVEN, Judge.

Plaintiff, Norfolk and Western Railway Company, instituted a proceeding in the Circuit Court of Kanawha County against Joseph S. Soto, Individually and as Tax Commissioner of the State of West Virginia, praying a declaratory judgment as to its rights and obligations arising under Chapter 33 of the 1933 Acts of the Legislature, First Extraordinary Session, as amended, now Article 12A of Chapter 11 of the 1955 Michie Code of West Virginia, relating to the assessment and collection of privilege taxes. Having succeeded the defendant Soto in office, John A. Field, Individually and as Tax Commissioner of the State of West Virginia, was substituted in lieu of the original defendant. A demurrer interposed to the petition was sustained in part, and the questions decided thereby were certified to this Court

The petitioner alleges, in effect: That it is a public service corporation, organized under the laws of Virginia and authorized to transact business as a common carrier in Virginia, West Virginia, North Carolina, Kentucky, Ohio and Maryland; that its railroad extends through Jefferson, Mercer, McDowell, Mingo and Wayne Counties of West Virginia; that after its railroad enters West Virginia at a point near Glen Lyn, Virginia, it extends over territory of West Virginia for approximately 22.51 miles to a point where it crosses the boundary line between West Virginia and Virginia, then extends for approximately 5.48 miles over territory of Virginia to a point where it again enters West Virginia, then extends over territory of West Virginia to a point near Matewan, where it crosses the boundary line between West Virginia and Kentucky, then extends over territory of Kentucky for a distance of 0.28 of a mile to a point where it again enters West Virginia, and then continues over territory of West Virginia until it crosses the boundary line between West Virginia and Ohio; that its business in West Virginia is '(a) freight and/or passengers originating and terminating and conducted entirely within this state, hereinafter called 'intrastate business'; and (b) freight and/or passengers not conducted entirely within this state, including freight and/or passengers originating within the State of West Virginia and destined to a point outside of West Virginia, freight and/or passengers originating at a point outside of West Virginia and destined to a point within West Virginia, freight and/or passengers originating and terminating within West Virginia but passing through the adjoining state or states, and freight and/or passengers originating and terminating at points outside of West Virginia but passing through the State of West Virginia, all hereinafter called 'interstate business"; that its facilities in West Virginia handle both interstate and intrastate business, and that it is 'impossible to distinguish or separate the properties and facilities employed in each type of service'; that the tax imposed on petitioner by virtue of the statute mentioned, 'since the enactment of the law in 1933, exceeded in amount plaintiff's gross receipts from the exercises of the privilege subject to the tax'; that for the year 1954 the gross revenue of all intrastate traffic was $302,294, the net railway operating income from intrastate income before payment of the tax assessed by virtue of Sections 2, 5a and 5b, was $47,155 and that the tax assessed by virtue of such sections was $450,473; that the tax imposed on plaintiff by virtue of Section 2 of the Act, for each of the years since the enactment thereof, has averaged approximately $443,000, and that the entire receipts from its intrastate business, for each of said years, have averaged approximately $284,000; that plaintiff has withheld and declined to pay the tax assessed against it by virtue of Sections 2 and 5a for the third quarter of 1954, amounting to $112,618.28, plus a penalty of $1,126.18; and that payments of the taxes previously assessed by virtue of such statutes have been made by plaintiff under protest.

Absent from the petition is any allegation of fact relating to the income of the plaintiff as to its entire business done in West Virginia; as to plaintiff's interstate business done in West Virginia; as to the quantity of its intrastate or interstate business measured in ton-miles; as to the quantity of loop traffic moved over the 5.48 miles or the 0.28 of a mile; as to whether such loop traffic is merely incidental to plaintiff's intrastate business; or as to the benefits derived by plaintiff from the exercise of the privilege taxed. No complaint is made as to the value placed on the property of plaintiff located in West Virginia, or as to the manner of the computation of the tax assessed for the year 1954, the tax year in question, pursuant to Section 2 of the Act, or that the tax was computed in a manner different from the computation of the tax as to any other taxpayer.

The questions certified are: '1. Must all sections of Article 12A of Chapter 11, Code of West Virginia of 1931, as amended, applicable to railroad corporations and the operation of that Article as a whole upon the entire business of the plaintiff conducted within this state, be considered in determining whether the tax imposed by Section 2 thereof and the surtax thereon constitute a direct and unlawful burden upon the interstate business of the plaintiff? 2. If the tax imposed by Section 2 and the surtax thereon may be considered separately from the other provisions of Article 12A for the purpose of determining whether such tax unlawfully burdens interstate commerce, must the plaintiff's business conducted between points in this state but passing enroute through the State of Virginia for 5.48 miles and/or the State of Kentucky for 0.28 mile, be considered in determining whether such tax constitutes a direct and unlawful burden upon the interstate business of the plaintiff? 3. May the issue of whether the measure of the tax imposed by Section 2 and the surtax thereon denies plaintiff due process of law because it is arbitrary, in that it bears no reasonable relation to the value of the taxed privilege, be determined by the effect of such tax upon the plaintiff's business in this state or must it be determined by the general operation and effect of such tax upon the class of taxpayers to which it applies?'

Article 12A of Chapter 11 of the Michie 1955 Code deals with 'Privilege Tax on Certain Carrier Corporations'. Section 1 thereof defines certain words and terms. Section 2 reads:

'Every railroad corporation doing business in the State shall pay an annual privilege tax for each calendar year for the privilege of doing business in the State. The tax shall be five-tenths of one per cent of the value of the total property, tangible and intangible, of the corporation in the State as determined by the assessment made during the calendar year by the board of public works for the purposes of the general property tax.

'It is the purpose of this section to levy a privilege tax upon railroad corporations for the privilege of engaging in business conducted entirely within this State, and it is not intended to impose any tax or charge upon interstate or foreign commerce. The return required for purposes of the general property tax shall suffice for purposes of this section.

'No public corporation of the State shall levy a license or privilege tax on the business taxed under this section.'

Sections 3 and 4 provide for the assessment of privilege taxes against certain taxpayers other than railroads. Section 5, in so far as pertinent, rads: 'In addition to the tax imposed in the preceding sections * * * every railroad corporation * * * doing business in this State shall pay an annual privilege tax for each calendar year for the privilege of doing business in the State, to be determined as follows: * * * (b) The tax...