Salt Lake County v. Utah Copper Co.

• Citation: 93 F.2d 127
• Decision Date: 22 November 1937
• Docket Number: No. 1554.,1554.
• Parties: SALT LAKE COUNTY v. UTAH COPPER CO.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

93 F.2d 127 (1937)

SALT LAKE COUNTY v. UTAH COPPER CO.

No. 1554.

Circuit Court of Appeals, Tenth Circuit.

November 22, 1937.

Mahlon E. Wilson, of Salt Lake City, Utah (Henry D. Moyle, Robert C. Wilson, Harold E. Wallace, Co. Atty., and Brigham E. Roberts, Deputy Co. Atty., all of Salt Lake City, Utah, on the brief), for appellant.

C. C. Parsons, of Salt Lake City, Utah (A. C. Ellis, Jr., and Wm. McCrea, both of Salt Lake City, Utah, on the brief), for appellee.

Before PHILLIPS and WILLIAMS, Circuit Judges, and SYMES, District Judge.

PHILLIPS, Circuit Judge.

The Utah Copper Company brought this action against Salt Lake County, Utah, to recover the sum of $251,509.90, being the amount of tax for the year 1935 paid by the Copper Company under protest upon its metalliferous mines situated in Salt Lake County. From a judgment in favor of the Copper Company for $85,828.21 the county has appealed.

The cause came on for trial before a court and jury. At the conclusion of the evidence both sides moved for a directed verdict. Thereupon the parties in open court orally waived trial by jury.

The record consists of the pleadings, special findings of fact, conclusions of law and judgment. It contains no bill of exceptions.

The statutes of Utah provided in 1935, that metalliferous mines should be assessed at $5.00 per acre plus a value equal to three times the net annual proceeds thereof for the calendar year next preceding.¹ They further provided that all machinery used in mining, all property or surface improvements upon or appurtenant to mines or mining claims, and the value of any surface use made of mining claims or mining property for other than mining purposes should be assessed at full value.

The facts disclosed by the findings are these:

Ordinarily mine owners ship their product of crude ores, concentrates, and precipitates to the smelter, where they are sampled, assayed, purchased, and paid for by the smelter pursuant to the terms of smelting contracts. In that manner the Copper Company disposed of its gold and silver produced in the years 1909 to 1932, inclusive. The Copper Company has produced blister copper² in such large quantities that it has never been practical for the smelter to purchase it, and since January 1, 1933, the Copper Company has not sold its gold and silver to the smelter, but has paid the smelting and refinement charges and taken delivery from the refinery of its gold and silver along with its blister copper and sold the refined product as rapidly as the market would absorb it.

In 1910 the taxing authorities appraised the whole of the copper production for 1909, including the sold and unsold blister copper, and added thereto the amount received for the gold and silver produced in 1909 to arrive at the gross proceeds and deducted therefrom the statutory production costs for the year 1909 to arrive at the net annual proceeds, to be used as a basis for taxation for the year 1910. For the years 1911 to 1932, inclusive, the taxing authorities followed the method employed in 1910.

Effective January 1, 1933, the Copper Company made a new smelting contract whereby gold and silver were no longer purchased by the smelter, but were thereafter delivered to the Copper Company along with the blister copper, and thereafter to and including the year 1935 the taxing authorities appraised the Copper Company's production of gold and silver as they had previously appraised the copper and included such appraised value of gold and silver in the Copper Company's gross annual proceeds.

In the year 1931 the Copper Company continued to operate its mine, but was unable to dispose of the copper produced because there was no market therefor; and as a result it had on hand and unsold on January 1, 1932, 67,752,587 pounds of copper. The assessing authorities appraised this copper and included it in the gross proceeds of the Copper Company in valuing its mines for the year 1932.

In the years 1933 and 1934 a new method was employed to determine the Copper Company's net annual proceeds. In those years the taxing authorities permitted the Copper Company to return for inclusion in its gross proceeds only its actual sales of copper made during the year preceding, but appraised the gold and silver production, and from such total gross proceeds deducted the statutory costs of producing the copper sold and the gold and silver appraised and thereby arrived at the Copper Company's net annual proceeds. This change of method was made at the request of the Copper Company for accounting convenience.

In the years 1933 and 1934 the Copper Company sold more copper than it produced during those years and hence each year sold a part of its inventory on hand January 1, 1932.

In employing the sales method in lieu of the appraisal method to determine the production for 1933, as a basis of valuation for 1934, sales in 1933 from current production and also from the unsold inventory on hand January 1, 1932, were included. Since the inventory stock had been appraised and used as the basis for determining gross production for 1932, a double tax was imposed for the year 1934, to the extent of $43,630.39. The Copper Company, however, paid the excess tax without protest.

In the year 1934 the Copper Company sold out of the inventory on hand January 1, 1932, 14,804,016 pounds of copper, and in addition the copper it produced during 1934. In the year 1935 the taxing authorities added to the appraised value of the 1934 production of gold and silver, the gross proceeds received by the Copper Company from the sales of copper made in 1934 to arrive at gross proceeds, but, over the Copper Company's protest, refused to allow any deductions to cover production costs of copper sold in 1934 but produced in prior years. In other words, in arriving at the gross proceeds for 1934 the taxing authorities included the sales in 1934 of 14,804,016 pounds of copper made from the January 1, 1932 inventory and the sales made from 1934 production, but refused the Copper Company any deductions for costs of producing the copper sold from inventory.

Thereupon the Copper Company demanded a return to the old method of appraisal of the year's production. The taxing authorities refused. The Copper Company paid the alleged excessive tax under protest and brought this action to recover it.

Taxation of net annual proceeds of mines was first provided by chapter 129, Laws of Utah 1896, effective April 5, 1896. It provided that the taxpayer's statement each year must show the gross yield and cost of production and reduction of the ores and "the conversion of the same into money, or its equivalent, during the year." Section 63. The statute was reenacted by the Revised Statutes of Utah 1898, §§ 2504, 2566, 2567, 2568, without substantial change. The statute was amended in 1899. It continued to provide for the taxation of the net annual proceeds of mines and employed the phrase "the conversion of the same the ore into money, or its equivalent, during the year." Laws of Utah 1899, pp. 103, 104; Comp.Laws of Utah 1907, §§ 2504, 2566, to 2568, inclusive.

The statute was again amended in 1909 (Laws 1909, pp. 99, 100). But likewise continued to provide for the taxation of the net annual proceeds and employed the phrase above quoted. Comp.Laws of Utah 1917, §§ 5864, 5929 to 5931, inclusive. The latter law continued until January 1, 1919. On that date section 4, article 13 of the Constitution of the State of Utah as amended became effective. It provided for the assessment of all metalliferous mines or mining claims "at a value based on some multiple or sub-multiple of the net annual proceeds thereof." Comp.Laws of Utah 1917, p. 94-A.

Pursuant to the constitutional amendment the legislature adopted a statute which provided that the value of metalliferous mines should be determined by multiplying their net proceeds by three. Laws Utah 1919, c. 114, § 5864. The act last referred to defined "net annual proceeds" as follows:

"The net proceeds realized during the preceding calendar year from the sale, or conversion into money, or its equivalent, of all ores from such mine or mining claim," after making certain specified deductions from the gross proceeds.

On November 4, 1930, section 4, article 13 of the Constitution of the State of Utah was amended to provide that all metalliferous mines should be assessed as the legislature should provide. R.S.Utah 1933, p. 57. In 1931 the legislature amended certain provisions of the statute relating to the taxation of metalliferous mines, but again defined net annual proceeds as follows:

"The words `net annual proceeds' of a metalliferous mine or mining claim as used in this section are defined to be the net proceeds realized during the preceding calendar year from the sale, or conversion into money, or its equivalent, of all ores from such mine or mining claim," after making certain specified deductions. (Italics ours.) Laws Utah 1931, pp. 217, 218, § 5864.

The statute was reenacted by the Revised Statutes of Utah 1933, 80-5-57, without material change in the definition of net annual proceeds. See note 1.

From the foregoing it will be seen that the definition of gross annual proceeds has remained substantially the same throughout the taxing acts of Utah since 1896.

Section 5929, Laws of Utah 1931, pp. 217, 224, as amended by R.S.Utah 1933, 80-5-59, in part reads:

"Every person engaged in mining or working a vein or lode, or placer mining claim, or dumps, or tailings, containing gold, silver or other metalliferous mineral deposits, shall make and file with the tax commission, on or before the 10th day of February in each year, a sworn statement showing the gross annual proceeds from each mine or mining claim and the production thereof in fine ounces of gold and silver and other precious metals, and in pounds of lead, copper and other semiprecious and base metals, and the deductions provided for in section 80-5-57."

Blister copper has...