Okla. Tax Comm'n v. Tex. Co.

Decision Date15 February 1938
Docket NumberCase Number: 27202
Citation182 Okla. 91,1938 OK 99,76 P.2d 389
PartiesOKLAHOMA TAX COMMISSION v. TEXAS CO.
CourtOklahoma Supreme Court
Syllabus

¶0 1. LICENSES--SALES TAX--Occasional Sales of Impounded Water and Obsolete Material Used by Oil and Gas Company Held not Subject to Sales Tax.

The occasional sales of impounded water and obsolete material used in the conduct of the business of one engaged in the occupation of production and sale of oil and gas are not the sales of "goods, wares or merchandise" in the ordinary course of the transferer's business and are not subject to the sales tax. (Sections 3 and 4, art. 7, chap. 66, Sess. L. 1935.)

2. SAME--Gas Upon Which Gross Production Tax Has Been Paid not Subject to Sales Tax.

Gas, natural or artificial, upon which gross production tax has been paid, held not subject to sales tax. (Subdivision (f), sec. 5, art. 7, chap. 66, Sess. L. 1935.)

3. SAME--Sales Tax not Applicable Where Materials Furnished by Cotenant in Operation of Oil and Gas Lease and Other Owners Charged with Their Proportion of Cost of Materials.

Sales tax does not apply where materials are furnished by a cotenant in the operation of a jointly owned oil and gas lease and the other owners are charged with their proportion of the cost of such materials. (Article 7. chap. 66, Sess. L. 1935.)

4. SAME--Sales Tax not Applicable Where Joint Owner Removes Equipment Used in Oil and Gas Production and Credits Other Owners With Their Proportion of Market Value.

Sales tax law does not apply where one joint owner of equipment used in the production of an oil and gas lease removed such property from the premises and retained same, and credited the other owners with their proportion of the market value of such property. (Art. 7, chap. 66, Sess. L. 1935.)

5. STATUTES--Scope of Act as Limited by Subject Expressed in Title.

The subject expressed in the title fixes a limit upon the scope of the act.

6. SAME--TAXATION--Provision of Sales Tax Law Levying Tax on Fair Market Value of Goods Imported or Brought Into State by Consumer Held Unconstitutional as not Within Title of Act.

Subdivision (j), sec. 4, art. 7, chap. 66, Sess. L. 1935, levying a tax on the fair market value of goods, wares, and merchandise imported or brought into this state by any consumer on which the Oklahoma consumers tax has not been paid, held unconstitutional as not within the title "An Act levying a consumers tax upon the gross receipts derived from the sales to consumers or users * * * of goods, wares and merchandise * * * sold in the state of Oklahoma." (Section 57, art. 5, Oklahoma Constitution.)

Appeal from District Court, Oklahoma County; R. P. Hill, Judge.

Action by the Texas Company against the Oklahoma Tax Commission. Judgment for plaintiff, and defendant appeals. Affirmed.

C. D. Cund, C. W. King. and A. L. Herr, for plaintiff in error.

J. H. Hill, John R. Ramsey, and Ames, Cochran, Monnet, Hayes & Ames, for defendant in error.

Ladner, Logsdon & Livingston, amici curiae.

HURST, J.

¶1 Plaintiff, Texas Company, brought this action against defendant, Oklahoma Tax Commission, to recover sales taxes with interest, which taxes had been paid under protest. Plaintiff set forth eight causes of action, same being numbered (a) to (h), inclusive. Prior to the trial, its cause of action numbered (a) was dismissed and is not now before us. Judgment was rendered for plaintiff on each of its causes of action, and the Tax Commission has appealed to this court.

¶2 No dispute exists as to the facts, and this court is presented only with the questions of law involved, which questions concern the proper construction of article 7, chap. 66, Sess. L. 1935, commonly known as the Sales Tax Act.

¶3 1. The first proposition to be considered is whether or not the gross proceeds from the sale of water is subject to the sales tax under the 1935 act, supra. It was stipulated that the Texas Company was engaged in developing properties for the production of oil and gas, and in connection therewith impounded surface waters upon its properties in Oklahoma. In May, 1935, the company received $293.27 from the sale of such water, upon which a sales tax of $2.93 was paid under protest. Plaintiff seeks recovery of said tax on the theory that (a) the sale of water is not a sale of goods, wares, or merchandise within the meaning of the act; and (b) the sale of water by plaintiff was not a transfer of tangible personal properties in the ordinary course of plaintiff's business.

¶4 In support of proposition (a), the Texas Company relics on the case of Wiseman v. Arkansas Utilities Co. (1935) 88 S. W. 2d 81, which held that artificial gas was not subject to the sales tax of Arkansas, since not included within the list of items of like nature, notwithstanding the general sections of the act providing that the tax applied to all retail sales of tangible personal property; and to the fact that in the original draft of the Oklahoma sales tax act, water was included, as a taxable item, but was stricken upon amendment and the bill passed as amended. We do not deem it necessary to pass upon these contentions, since we believe the sale of water by plaintiff, as contended in proposition (b), was not a transfer of tangible personal property in the ordinary course of plaintiff's business.

¶5 Section 3 of the act reads in part as follows:

"The term 'sale' or 'sales' shall mean any transaction by which is transferred for consideration the ownership of tangible personal property * * * when such transfer is made in the ordinary course of the transferor's business and is made to the transferee for consumption and/or use or for any other purpose than for resale."

¶6 Section 4, which levies the tax, reads in part:

"There is hereby levied a tax of one per centum upon the gross proceeds of all sales and/or purchases of all tangible personal property consisting of goods, wares or merchandise sold to or purchased by consumers and/or users within the state of Oklahoma. * * *"

¶7 Using the word "sale" in section 4, as defined in section 3, it is apparent that the tax, so far as pertinent here, applies to the transfer of ownership, for consideration, of goods, wares, or merchandise, in the ordinary course of the transferor's business.

¶8 This court held in the case of Muskogee Wholesale Grocery Co. v. Durant (1915) 49 Okla. 395, 153 P. 142, that the Bulk Sales Law, "affecting sales or transfers of a stock of goods, wares and merchandise or portions thereof, applies to those articles usually kept for sale in the ordinary course of business and does not include fixtures". See, also, the cases of Texas Hide & Leather Co. v. Bonds (1932) 155 Okla. 3, 8 P.2d 20, and Hood Rubber Products Co. v. Dickey (1934) 167 Okla. 304, 29 P.2d 115, which extended the doctrine to machinery and tools used in the business.

¶9 We believe the rule above applicable here. Article 7, supra, seeks to tax, among other things not pertinent here, the sale of goods, wares, or merchandise usually kept for sale and sold in the ordinary course of the transferor's business. This does not include water used in the conduct of the transferor's business which he may sell occasionally, as was done in this case, and which is not the type of goods, wares, or merchandise usually kept for sale by him in the ordinary course of his business. It is stipulated that plaintiff is a corporation engaged in the business of producing, refining, manufacturing, and marketing oil and gas and other petroleum products. No contention is made that plaintiff is engaged in the business of selling water.

¶10 We therefore hold that the gross proceeds from the sale of water are not subject to the sales tax imposed by section 4, art. 7, supra, under the facts of this case.

¶11 2. The second and third propositions raise the question as to whether or not the gross proceeds of the sale of gas upon which the gross production tax has been paid are subject to the sales tax.

¶12 Subdivision b, section 4, of the act expressly subjects the gross proceeds of sales of "gas (natural or artificial) to consumers and/or users thereof" to the tax. It is contended, however, by the plaintiff that subdivision (f) of sec. 5 of the act exempts the sale of the gas in question here from the tax, since it provides:

"There are hereby specifically exempted from the tax imposed by this act, the following: * * * (f) The gross proceeds derived from the sale and/or purchase of any tangible personal property and/or service subject to any stamp, excise or any other kind of tax, imposed under and by virtue of article ten (10), section twelve (12) of the Constitution of the state of Oklahoma."

¶13 Article 10, section 12, Const., supra, includes, among others "production" taxes.

¶14 That gas upon which the gross production tax has been paid falls squarely within the exempting clause above cited cannot be questioned. Defendant, however, contends that such a construction would render nugatory subdivision (b) of sec. 4, which specifically levies a sales tax upon the sales of gas (natural or artificial) to consumers or users thereof, and states that an act must be construed so as to give effect to all of its provisions.

¶15 We agree with the rule of construction contended for by the defendant, but do not agree that it is applicable in this instance. Under the construction we have given to the act, subdivision (b) of section 4 would be effective to subject sales of gas upon which no gross production tax has been paid, such as gas produced in other states and sold to consumers in this state, to the sales tax. Under the construction sought to be placed on the act by the defendant, subdivision (f) of sec. 5 would be rendered nugatory, and would thus violate the very rule of statutory construction urged by it.

¶16 We therefore hold that the gross proceeds of the sale of residue gas upon which the gross production tax has been paid are exempt from payment of the sales tax by virtue of subdivision (f)...

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4 cases
  • Waldrep v. Moses
    • United States
    • Oklahoma Supreme Court
    • January 30, 1940
    ...is applicable to legislative amendments. State, etc., v. American Surety So. of N. Y., 180 Okla. 565, 71 P.2d 745; Oklahoma Tax Comm. v. Texas Co., 182 Okla. 91, 76 P.2d 389. ¶14 In Ex parte Masters, 126 Okla. 80, 258 P. 861, we held, under authority of Pottawatomie County et al. v. Alexand......
  • Waldrep v. Moses
    • United States
    • Oklahoma Supreme Court
    • January 30, 1940
    ...103 P.2d 503 187 Okla. 475, 1940 OK 57 WALDREP v. MOSES, Judge. No. 29343.Supreme Court of OklahomaJanuary 30, 1940 ... ...
  • Okla. City v. Brient
    • United States
    • Oklahoma Supreme Court
    • June 17, 1941
    ...¶7 We have often held that the subject expressed in the title fixes a limit upon the scope of the act. Oklahoma Tax Commission v. Texas Co., 182 Okla. 91, 76 P.2d 389; Board of County Commissioners v. Giddings, 159 Okla. 103, 14 P.2d 418; Walker-Taylor Co. v. Board of Com'rs of Oklahoma Cou......
  • Oklahoma Tax Commission v. Texas Co.
    • United States
    • Oklahoma Supreme Court
    • February 15, 1938
    ...76 P.2d 389 182 Okla. 91, 1938 OK 99 OKLAHOMA TAX COMMISSION v. TEXAS CO. No. 27202.Supreme Court of OklahomaFebruary ... ...

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