Notgrass Drug Co. v. State ex rel. Rice, Atty.-Gen

• Decision Date: 17 February 1936
• Docket Number: 32035
• Citation: 165 So. 884,175 Miss. 358
• Court: Mississippi Supreme Court
• Parties: NOTGRASS DRUG CO. et al. v. STATE ex rel. RICE, ATTY.-GEN

165 So. 884

175 Miss. 358

NOTGRASS DRUG CO. et al. v. STATE ex rel. RICE, ATTY.-GEN

No. 32035

Supreme Court of Mississippi

February 17, 1936

Division A

APPEAL from chancery court of Hinds county HON. V. J. STRICKER Chancellor.

Suit by Slate against the Notgrass Drug Company and others. From decree overruling demurrer, defendants appeal. Affirmed and remanded.

Affirmed and remanded.

L. Barrett Sones and L. F. Easterling, both of Jackson, for appellants.

Chapter 119 of Laws of 1934 as applied to appellants is unconstitutional and void.

Whereas the legislatures have large powers in classifying persons or property for purposes of taxation, still even in privilege tax or excise tax laws there must be a substantial basis for the classification, and a license fee cannot be imposed upon persons where others in the same class enjoy different privileges or advantages.

Mayor v. Mullane, 106 Miss. 199. 63 So. 414.

The classification is not made upon the basis of substantial difference in the business of those favored and in the business of those not favored. It is an attempt by the legislature to favor certain persons exercising the same privilege in the same class and of denying the same privilege to others in the same class.

Adams v. Standard Oil Co., 53 So. 692, 97 Miss. 879.

Even if it be conceded for the sake of argument that this act was intended to impose privilege or occupational taxes because it is labeled such, still, nevertheless, it is the law, and has been so allowed by a long line of decisions of this court that such laws are to be strictly construed in favor of the citizen and against the public.

Ex parte Taylor, 58 Miss. 478; Railroad Co. v. State, 62 Miss. 105; Bluff City Railroad Co. v. Clark, 95 Miss. 689, 49 So. 177.

In support of our views that the attempted classification of storekeepers under the terms of this act is arbitrary, unreasonable, discriminating and without a just and reasonable basis to the object to be accomplished, we refer this court to the cases in this state judicially defining stores under the privilege tax laws of the state.

3 Miss. Digest 63; Pitts v. Vicksburg, 74 Miss. 881, 21 So. 756; Folks v. State, 63 Miss. 81; Carney v. Hamilton, 89 Miss. 747, 43 So. 378; Adams v. Lbr. Co., 84 Miss. 23, 36 So. 68; Hyland v. Sharp, 88 Miss. 567, 41 So. 264.

Legislation cannot make unequal discrimination to persons with the same class or doing the same kind of business

Ridgway v. Kelley, 40 So. 552, 88 Miss. 209, 11 L. R. A. (N. S.) 605, 47 A. S. R. 733.

This additional privilege tax, if it be a privilege tax at all, attempted to be imposed upon merchants is void and unenforceable because it contravenes the Fourteenth Amendment to the Constitution of the United States.

The tax sought to be imposed in the guise of the privilege tax is in reality a property tax.

Southern Packing Co. v. State Tax Commission, 164 So. 45. 174 Miss. 212.

Each case must be decided upon its own facts. If the language employed shows the tax to be a property tax, it will be treated as such though branded or labeled a "privilege tax."

26 R. C. L. 34-36; Adams v. Kuykendall. 83 Miss. 571, 35 So. 830; Hamilton v. Wilson, 59 P. 1069, 48 L. R. A. 238; Barnes v. Jones, 139 Miss. 675, 103 So. 773; Thompson v. McLeod 112 Miss. 393, 73 So. 193, L. R. A. 1918C. 893, Ann. Cas. 1918A. 674.

J. A. Lauderdale, Assistant Attorney-General, for the state.

The classification under consideration in this case is a reasonable one and within the legislative power.

In the event a statute levies a tax and contains provisos which make certain exceptions to and exemptions from the tax levied, and the exceptions and exemptions are invalid because of unreasonable or arbitrary classifications, the exceptions and exemptions will be stricken down and the statute levying the tax allowed to stand

Adams v. Kuykendall, 83 Miss. 571: Lawrence v. State Tax Commission, 162 Miss. 338; Smith, Tax Collector, v. Perkins 112 Miss. 870; Johnson v Long Furniture., 113 Miss. 373.

The Legislature has the power to classify property and fix each class differently, provided the classification is not manifestly arbitrary and unreasonable.

Southern Package Corporation v. State Tax Commission, 164 So. 45, 174 Miss. 212; State Tax Commission v. Flora. Drug Co., 148 So. 373; Fox v. Standard Oil Co., 79 L.Ed. 339; A. Magnano Co. v. Hamilton, 78 L.Ed. 1109; State Board of Tax Commissioners v. Jackson, 75 L.Ed. 1248.

I call the court's attention to the following cases wherein classifications were stained by the Legislature:

American Sugar Refining Co. v. Louisiana, 45. L.Ed. 102; Cargill Co. v. Minnesota, 45 L.Ed. 619; Metropolis Theatre Co. v. Chicago, 57 L.Ed. 730; Quong Wing v. Kuykendall, 56 L.Ed. 350; Kinsley v. Cottrel, 196 P. 614; Hudson v. Stewart, 166 Miss. 339; State v. Evans Terry Co., 159 So. 658; Mathiston v. Brister, 166 Miss. 67; Pryor v. State, 162 Miss. 602; 37 C. J. 217, section 73, and 236, section 89.

A statute is presumed to be constitutional and the burden of showing its invalidity is on the person attacking it.

State v. Miller, 144 Miss 614; Darnell v. Johnson, 109 Miss. 570; State v. Wheatley, 113 Miss. 555.

Appellants' contention, even if true, that the tax is passed on to and paid by the purchaser, would not render the levy of the tax invalid.

Pan-American Oil Co. v. Mississippi, ex rel., 72 L.Ed. 857; Wiloil Corp. v. Pennsylvania, 316 Pa. 33; Edeleman v. Boeing Air Transport, 77 L.Ed. 1115; Trinity Farm Construction Co. v. Grosjean, 78 L.Ed. 1466; Gregg Dyeing Co. v. Query, 76 L.Ed. 1232; Magnano v. Hamilton, 78 L.Ed. 1109; Monamotor Oil Co. v. Johnson, 78 L.Ed. 1141.

The classifications made by chapter 119, Laws of 1934, for the purpose of exceptions and exemptions from the tax levied by section 2 (e) of said chapter do not offend against the equal protection clause of the constitution.

Barnes v. Jones, 139 Miss. 675; Pryor v. State, 162 Miss. 600; Payne v. Kansas, 63 L.Ed. 153; Toyota v. Hawaii, 57 L.Ed. 180; Wilson & Co. v. Louisiana, 154 So. 637; Southwestern Oil Co. v. State of Texas, 54 L.Ed. 688; Pan-American Oil Co. v. State of Mississippi ex rel., 72 L.Ed. 857; Harrison County v. Gulf Coast Military Academy, 126 Miss. 729; Enoehs v. Jackson, 144 Miss. 360; Ridgley Lodge v. Redus, 78 Miss. 352; Senter v. Tupelo, 136 Miss. 269.

Special articles of merchandise may be specially taxed and likewise certain articles of merchandise may be exempted from a general tax.

The Supreme Court of the United States has sustained such statutes in the following cases.

American Manufacturing Co. v. St. Louis, 63 L.Ed. 1084; American Sugar Refining Co. v. Louisiana, 45 L.Ed. 102; Oliver Iron & Mining Co. v. Lord, 67 L.Ed. 930; Hope Natural Gas Co. v Hall 71 L.Ed. 1049; Utah Light & Power Co. v. Pfost, 76 L.Ed. 1038.

Courts of other states have sustained such statutes.

Hope Natural Gas Co. v. Hall, 102 W.Va. 272, 71 L.Ed. 1049; Knisely v. Cotterel, 196 Pa. St. Rep. 614; Reif v. Barrett, 188 N.E. 889; State ex rel. v. Welch, 251 N.W. 189; State ex rel. v. Telle, 25 P.2d; American Manufacturing Co. v. City of St. Louis, 192 S.W. 402; Miles v. Department of Treasury, 193 N.E. 855; Wiseman v. Phillips, 84 S.W.2d 91; State v. Wilson & Co., 154 So. 636.

OPINION

Smith, C. J.

The appellant is a retail merchant, and the question here presented is its liability vel non for the sales tax imposed by section 2-c, chapter 119, Laws 1934, the constitutional validity of which is challenged. This question would seem to be determined contrary to the appellant's contention by the case of Southern Package Corporation v. State Tax Commission (Miss.), 164 So. 45.

The appellant says, however, that case is not here controlling, for the reason that it arose under section 2-b of the statute, and involved only the liability of a manufacturer, and that the statute may be constitutionally valid as to a manufacturer, but invalid as to a retail merchant. We will not pause to inquire whether this is true.

The grounds of challenge, in addition to those disposed of by the case just cited, are: (a) That the tax is, in effect, a tax on purchasers, for the reason that the seller has the right to pass the tax on to the purchaser when making a sale; (b) that it constitutes a double taxation on the same property; and (e) that it discriminates arbitrarily between persons engaged in the sale of commodities.

1. It is unnecessary for us to inquire whether the Legislature may impose a tax in the nature of an excise or privilege on purchasers of a commodity, for the reason that the mere fact that the seller of a commodity may pass a tax on to a purchaser thereof has been too long and universally practiced to be now said to be unlawful. Such is the practical operation of all taxes imposed on a business or property used therein, and is one of the expenses of a business for which each person engaged therein must reimburse himself in order to continue in business.

2. The dealers here taxed also pay an ad valorem tax on the property used by them in their business, and a privilege tax for engaging therein, nevertheless the imposition of this tax is not within the rule, whatever that rule may be, against double taxation. To impose these several taxes has long been a Legislative custom, and is generally held to be unexceptionable.

3. The classifications and exemptions in the statute here complained of are:

Wholesale and retail dealers are separately classified, and the tax imposed on retailers is more than that imposed on wholesalers. A retailer, when selling his stock in bulk, is classified as a wholesaler. A dealer who sells on credit is required to report such sales, and pay the tax thereon only when the deferred payment is...