Railway Exp. Agency, Inc. v. Com.

• Decision Date: 02 December 1957
• Docket Number: No. 4742,4742
• Citation: 100 S.E.2d 785,199 Va. 589
• Court: Virginia Supreme Court
• Parties: RAILWAY EXPRESS AGENCY, INCORPORATED v. COMMONWEALTH OF VIRGINIA. Record

Page 785

100 S.E.2d 785

199 Va. 589

RAILWAY EXPRESS AGENCY, INCORPORATED v. COMMONWEALTH OF VIRGINIA.

Record No. 4742.

Supreme Court of Appeals of Virginia

December 2, 1957.

Thomas B. Gay (Robert J. Fletcher; William H. Waldrop, Jr.; H. Merrill Pasco; Hunton, Williams, Gay, Moore & Powell, on brief), for the appellant.

Frederick T. Gray, Special Assistant Attorney General (J. Lindsay Almond, Jr., Attorney General; Williams, Mullen, Pollard & Rogers, on brief), for the Commonwealth.

JUDGE: BUCHANAN

BUCHANAN, J., delivered the opinion of the court.

This is an appeal from an order of the State Corporation Commission which denied the application of the appellant made under § 58-672 of the Code for correction and refund of the franchise tax assessed against it by the Commission for the year 1956, pursuant to amended Article 4, Chapter 12, Title 58, § 58-546 through § 58-555 of the Code, as amended by Acts 1956, ch. 612, p. 964. The Code sections material to this controversy appear below. ¹ In its opinion filed in support of its order, as required by § 156(f) of the Virginia Constitution, the Commission held that the tax imposed by these sections was a property tax on intangible property of the appellant, in lieu of other property taxes, and not prohibited by the United States Constitution.

In its Annual Report for 1956, required by the Commission pursuant to § 58-548, the appellant, in response to the inquiry on the form furnished it by the Commission as to what receipts were by it 'earned in Virginia on business passing through, into or out of this State,' answered 'None', and attached a statement saying, in part, 'This Company does solely an interstate express business in Virginia and has no way of determining what part of the receipts derived by it from such business was earned 'in business passing through, into or out of this State'.'

The Commission thereupon, as directed by § 58-549, proceeded to 'make the assessments upon the best and most reliable information that it can procure'. By a method of calculation shown in the record it determined the appellant's gross receipts from business passing through, into or out of Virginia by computing on a mileage basis the proportion which its receipts from express transported by it over six railroads (omitting ten others because de minimis) and five airlines operating in Virginia bore to the total receipts from express transported by the appellant over the entire lines of these carriers. The amount so ascertained as gross receipts earned in Virginia was $6,499,519, to which the 2.15% rate fixed by § 58-547 was applied, resulting in the tax of $139,739.66 assessed by the Commission against the appellant, of which it now complains.

The appellant, which will sometimes be referred to herein as the Delaware Company, was incorporated in Delaware in 1928, and does an express business in all of the States of the Union, interstate in all, and intrastate in all except Virginia. Because of the provisions of § 163 of the Virginia Constitution it was denied a certificate to engage in intrastate express business in this State. ² The Delaware Company has a contract with 68 railroads which own its entire capital stock, and 109 non-stockowning railroads which gives it the exclusive right and privilege to conduct express transportation business over their lines, including those operating in Virginia.

In 1931 the Delaware Company caused to be chartered and organized under the laws of Virginia the Railway Express Agency, Incorporated, of Virginia, for the purpose of conducting a purely intrastate express business in Virginia. The Delaware Company owns all the stock of the Virginia Company and in 1932 entered into a contract with it by which the Virginia Company agreed to conduct the intrastate business in Virginia on the lines of the railroads named by the Delaware Company, and to perform the obligations of the latter company with its contracting carriers concerning intrastate operations in Virginia. The contract provided for joint use by the two companies of real and personal property, equipment and employees.

On the hearing before the Commission it was stipulated that the Delaware Company 'conducts an express business in interstate commerce and intrastate commerce in each of the states of the United States with the exception of Virginia, in which it conducts only an interstate business,' and that the Virginia Company 'conducts solely an intrastate business in the State of Virginia'.

Under its assignments of error on this appeal the appellant contends: (1) that § 170 of the Virginia Constitution does not authorize the imposition of this tax; that § 58-546 does not impose it; that § 58-547 provides no adequate method for determining gross receipts from interstate commerce and does not authorize the method employed by the Commission; (2) that the tax imposed is not a property tax as held by the Commission, but a tax levied upon the privilege of doing an interstate business in Virginia and hence invalid; (3) that the Commission should not have classified appellant's automotive equipment and trucks as rolling stock; and (4) that the Commission erred in rejecting as immaterial some of appellant's offered exhibits.

First. Section 170 of the Virginia Constitution provides that the General Assembly 'may impose State franchise taxes,' and may 'make the same in lieu of taxes upon other property, in whole or in part, of a transportation, industrial, or commercial corporation'. Appellant's argument is that this should be construed to mean only domestic transportation corporations and not applied to the appellant which as a foreign corporation has been denied authority to do intrastate express business in Virginia. We do not agree. Section 170 authorizes the imposition of a franchise tax on transportation companies. The appellant is a transportation company, so defined by § 153 of the Constitution. It owns property and does an interstate express business in Virginia. Section 158 of the Constitution says that all property, except as in the Constitution provided, shall be taxed. Certainly no exception of foreign transportation companies is in terms made in § 170 nor do we think that such an exception can be fairly inferred. Limitation on the power of the legislature to impose the tax would have to proceed from a prohibition in the Constitution, not from absence of conferred authority. The powers of the legislature are plenary except as restrained by the Constitution. 4 Mich. Jur., Constitutional Law, § 31, p. 114. We cannot say that our constitutional and statutory provisions were not intended to and do not apply to the appellant, as was said in State v. Plantation Pipe Line Co., 265 Ala. 69, 89 So.2d 549, to be true of the provisions of the Alabama Constitution and laws under former decisions to the effect that a foreign corporation doing an exclusively interstate business in Alabama does not 'do any business in this state.' ³

Section 58-546 provides that 'Each express company' doing business in this State shall pay a franchise tax in lieu of taxes on other intangible property and in lieu of property taxes on its rolling stock. Appellant is an express company doing business, interstate at least, in this State. Section 58-547 fixes the rate and provides that where operations are partly within and partly without the State, the gross receipts from operations in the State shall be all receipts on business beginning and ending within the State and all receipts from the transportation within this State of express transported through, into, or out of this State. Appellant argues that in order for an express company to be subject to these provisions it must do either an intrastate business, or both an intrastate and interstate business, and since it does only an interstate business the statute does not apply to it. We are not impressed by the argument. Section 58-546 describes the corporations which must pay the tax, and § 58-547 only fixes the rate and provides how the gross receipts to which it applies shall be identified. We detect no purpose in the statute to exempt the appellant because it earns only one kind of the receipts referred to.

Section 58-547 does not undertake to prescribe the method of ascertaining the amount of these gross receipts. Sections 58-548 and 58-549 do that. The primary method is for the express company to report what these receipts are. Nobody else could as easily obtain that information. The secondary method is not needed unless the express company fails to furnish the information, which happened here. In that event the Commission is required to make the assessment on the best and most reliable information it can get. It did that by the method above stated. It is a method frequently resorted to in the fields of Federal and State taxation and doubtless necessary in the administration of tax laws. As a method it is obviously authorized and seems generally considered legal.

Second. Is the tax imposed by amended sections 58-546 ff. a property tax as held by the Commission and contended by the Commonwealth, or is it only a tax on the privilege of conducting an interstate express business in Virginia as contended by the appellant?

In the cases of Commonwealth v. Baltimore Steam Packet Co. and Commonwealth v. Norfolk, Baltimore and Carolina Line, Inc., 193 Va. 55, 68 S.E.2d 137, we held that the gross receipts tax imposed on the steamship companies pursuant to what was then § 58-575 of the Code was a property tax. We so held although the statutes there involved denominated the tax a license tax levied for the privilege of doing business in this State, and in addition to the annual registration fee and property tax levied by other statutes. We there reviewed a number of Supreme Court decisions and concluded therefrom that the tax so assessed was not invalid as being a tax upon the privilege of carrying on an exclusively interstate business, but one fairly...