Opinion of the Justices, 4057

Citation97 N.H. 533,81 A.2d 845
Decision Date15 May 1951
Docket NumberNo. 4057,4057
PartiesOPINION OF THE JUSTICES.
CourtSupreme Court of New Hampshire

Atlee F. Zellers, Legislative Counsel to the Governor, Concord (by brief and orally), and Perkins Bass, Manchester (orally), for the bill.

Hamblett, Griffith, Moran & Hamblett, Nashua (Mr. Robert B. Hamblett, Nashua, orally), for New Hampshire Council of Retail Merchants, opposed.

Gardner C. Turner, Keene (orally), also opposed.

The following resolution was adopted by the House of Representatives at the present session of the General Court on May 3, 1951:

'Resolved, that the Justices of the Supreme Court be respectfully requested to give their opinion upon the following question of law:

'1. Do the provisions of House Bill No. 418, An Act Repealing Certain Taxes and Providing for Additional Revenue of the State, Including a Retail Sales Tax, violate in any way the provisions of the fundamental law of the State with respect to the following:

'(a) The provisions of Section 2 of said bill by which the tax on stock in trade and the tax on live stock are repealed and a tax imposed on raw materials and goods in process. '(b) The provisions contained in said Section 2 by which the State Tax Commission shall have the final determination of what constitutes finished products.

'(c) Those provisions of Section 6 of said bill contained in Sections 34, 35 and 36 of the proposed Chapter 79B of the Revised Laws, whereby certain funds would be distributed to towns and cities in 1952 and subsequent years according to taxes levied in 1950 by each town or city on manufacturers' finished goods, merchants' stock in trade and live stock, and particularly whether it is constitutional to provide for such distribution in future years when such distribution may have no relation to the amount which each town or city would have levied on said items in the year of distribution.

'(d) Those provisions of said Section 6 contained in Section 4 of the said proposed Chapter 79B relating to the retention of breakage, with particular reference to the fact that the breakage would have no rational relation to the amount of services performed by the retailer. Nor is there any rational relationship between the formula for levy on the consumer taxpayer and the formula for making returns by the retailer collector of the tax.

'(e) Those provisions of said Section 6, contained in section 2 of said proposed Chapter 79B, whereby a tax is imposed on beverages as defined in Chapter 170 of the Revised Laws as amended, except when consumed on the premises.

'2. Does any other provision of the said bill appear to be in conflict with the Constitution, or the Constitution of the United States.

'Further Resolved, that the Justices of the Supreme Court be respectfully requested [to give] their opinion on the following additional questions of law with reference to House Bill No. 418, An Act Repealing Certain Taxes and Providing Additional Revenue for the State, Including a Retail Sales Tax:

'1. Do the classifications of property to be taxed or exempted from taxation as personal estate under sections 2 through 5 of the bill violate any of the provisions of the fundamental law of this state?

'2. If the classification of finished goods as defined in section 2 of the bill violates the fundamental law, may the Legislature constitutionally define and exempt finished goods as 'any item which has been completely processed and which will be sold in retail trade'?

'3. Do the classifications contained in section 1, 2 and 3 of the sales tax chapter proposed by section 6 of the bill violate any of the provisions of the fundamental law of this state?

'4. Does any other provision of the said bill appear to be in conflict with the Constitution?

'Further Resolved, that the Speaker transmit a copy of this Resolution and of House Bill No. 418 to the Clerk of the Supreme Court for consideration by said Court.'

The following answer was returned:

To the House of Representatives:

The undersigned Justices of the Supreme Court make the following answers to the inquiries contained in your resolution adopted the third of May, 1951, with reference to House Bill No. 418, An Act Repealing Certain Taxes and Providing for Additional Revenue of the State, Including a Retail Sales Tax.

It should be noted that the validity of a tax on retail sales is not questioned. That such a tax is constitutional has been declared by this court on former occasions. Opinion of the Justices, 84 N.H. 559, 576, 149 A. 321; Opinion of the Justices, 88 N.H. 500, 190 A. 801; Opinion of the Justices, 95 N.H. 546, 64 A.2d 314. 'The tax being upon 'the transmission of property in a distinctive way,' it is immaterial whether it be placed upon the seller or upon the purchaser.' Opinion of the Justices, 88 N.H. 500, 503, 190 A. 801, 804. Tangible personal property sold at retail is one of the 'other classes of property' referred to in Art. 6 of Part II of the Constitution as being subject to taxation. See also Havens v. Attorney-General, 91 N.H. 115, 14 A.2d 636; Opinion of the Justices, 94 N.H. 506, 52 A.2d 294.

Question 1(a) raises the issue of whether it is constitutional to repeal the stock in trade tax and the tax on live stock, R.L. c. 73, § 16, as amended, and impose a tax on raw materials and goods in process other than finished products of any manufactory. Insofar as this provides for the imposition of a tax it includes in the class of general property or estates raw materials and goods in process other than finished products of any manufactory. The issue raised is whether it is constitutional at the same time to exempt the stock in trade of merchants and others. No constitutional question is presented by the repeal of the tax on live stock and poultry. Opinion of the Justices, 88 N.H. 500, 510, 511, 192 A. 494.

'In the selective process of classifying certain property for taxation and exempting other property the Legislature has a wide discretion which will be sustained 'provided just reasons exist for the selection made.' Opinion of the Justices, 94 N.H. 506, 508, 509, 52 A.2d 294.' Opinion of the Justices, 95 N.H. 548, 550, 65 A.2d 700, 701. The Legislature has liberal powers with respect to the classification of taxable property. Canaan v. Enfield Village Fire District, 74 N.H. 517, 70 A. 250. It may be made for any just reason. Opinion of the Justices, 82 N.H. 561, 574, 138 A. 284. If there is such reason and the proposed selection is not arbitrarily made or for the sole purpose of preferring some taxpayers to others it will be upheld.

The argument is made that imposition of a tax upon the raw materials and goods in process of manufacturers coupled with repeal of the tax upon the stock in trade of retailers and wholesalers is not a selection supported by 'just reason.' Cf. Opinion of the Justices, 95 N.H. 548, 65 A.2d 700. Originally, a tax was imposed upon the stock in trade of merchants, while that of manufacturers went untaxed. See Smith v. Burley, 9 N.H. 423. Commencing in 1825, however, and since that date, taxes have likewise been imposed upon the 'raw materials and manufactures of any manufactory'. R.L. c. 73, § 16. The language used in H.B. 418: 'raw materials and goods in process * * * of any manufactory,' in substitution, is not thought to be so vague and indefinite as to be unsupportable.

The requirement of the Constitution is not violated by what is now proposed. While wholesalers and retailers will be exempt from a property tax upon their stock in trade, it is proposed to tax this property in the future by a tax upon its sale, paid directly by the consumer. Property in the marketing process is thus to be taxed but once, 'and the event is fixed at the transfer from the retailer.' Opinion of the Justices, 84 N.H. 559, 577, 149 A. 321, 330. To impose another tax upon goods in the manufacturing process is not unjust nor is it discriminatory. Manufactured goods are not necessarily sold within the state. If not, they would escape all taxation. To tax them by property tax during the process of manufacturer, and again in different form, upon their transfer to the consumer, by sales tax, is not double taxation of the sort forbidden by the Constitution. 'The taxation of personal property may sometimes necessarily involve duplicate taxation to a certain extent. * * * But such indirect influence is not the double taxation which is unreasonable within the meaning of the Constitution.' Opinion of the Justices, 77 N.H. 611, 614, 93 A. 311, 312. 'The incidence of the two taxes is determined by separate and distinct factors.' Opinion of the Justices, 84 N.H. 559, 577, 149 A. 321, 330, supra. 'Whether the * * * taxes shall be assessed to the consumer or to the manufacturer * * * are questions of convenience and expediency, and not of equality and legal right.' Morrison v. Manchester, 58 N.H. 538, 555. Question 1(a) is answered in the negative.

Question 1(e) relates to a section of the act the wording of which is somewhat difficult to follow. As we understand it, however, the question is raised whether it is constitutional to tax beverages consumed on the premises while not taxing those sold for consumption off the premises. The right of the state to control the sale and consumption of alcoholic beverages under both its police power and taxing power is more extensive than in the case of commodities thought to be less harmful and requiring less regulation. This control has been exercised fully from the earliest times. State v. Holmes, 38 N.H. 225; State v. Corron, 73 N.H. 434, 445, 62 A. 1044. While this right to control under the police power and taxing power is not unlimited, Manchester Press Club v. State Liquor Commission, 89 N.H. 442, 200 A. 407, 116 A.L.R. 1093, there is no doubt that the state has wide discretion in taxing the sale and consumption of alcoholic beverages. All such beverages might be taxed. The reason for taxing beverages consumed on the premises...

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