St. Louis Southwestern Railway Co. v. State ex rel. Norwood

• Decision Date: 27 January 1913
• Citation: 152 S.W. 110,106 Ark. 321
• Parties: ST. LOUIS SOUTHWESTERN RAILWAY COMPANY v. STATE Ex rel. HAL L. NORWOOD, Attorney General
• Court: Arkansas Supreme Court

152 S.W. 110

106 Ark. 321

ST. LOUIS SOUTHWESTERN RAILWAY COMPANY v. STATE Ex rel. HAL L. NORWOOD, Attorney General

Supreme Court of Arkansas

January 27, 1913

Appeal from Pulaski Chancery Court; John E. Martineau, Chancellor affirmed.

STATEMENT BY THE COURT.

The Attorney General, proceeding under Act No. 112, entitled "An Act for an annual franchise tax on corporations doing business in the State of Arkansas" (Acts of Arkansas, 1911, page 67), brought this suit to recover the franchise tax levied against the St. Louis Southwestern Railway Company by the Arkansas Tax Commission under the provisions of said Act for the year 1911.

The complaint alleges that the amount of taxes is $ 6,798.26 together with a penalty of twenty-five per cent, amounting to $ 1,699.56, making a total of $ 8,497.82. The defendant, St Louis Southwestern Railway Company, is a railway corporation organized under the laws of the State of Missouri. It is engaged in the business of a common carrier of freight and passengers, and owns and operates lines of railroad in the States of Arkansas, Missouri, Illinois and Louisiana. Act No 112 requires each corporation doing business in the State to make a report to the Arkansas Tax Commission showing, among other things, the total amount of its capital stock authorized, subscribed, issued, outstanding and paid up, the market value of the same, and the value of the property owned and used by the corporation in the State, and the value of the property owned and used by it outside of the State. Section 6 of the Act is as follows:

"Upon the filing of the report provided for in sections 4 and 5 of this Act, the commissioner or assessor, as the case may be, from the facts thus reported and any other facts coming to its or his knowledge bearing upon the question, shall determine the proportion of the authorized capital stock of the company represented by its property and business in this State on or before July 20, and shall report the same to the Auditor of the State, who shall charge and certify to the Treasurer of the State on or before August 1, for collection as herein provided, annually from such company, in addition to the initial fee otherwise provided by law, for the privilege of exercising its franchise in this State one-twentieth of one per cent each year thereafter upon the proportion of the outstanding capital stock of the corporation represented by property owned and used in business transacted in this State."

The defendant under protest made the report required by the Act. This report, among other things, showed that the total amount of its authorized capital stock was $ 55,000,000, and the total amount of issued and outstanding stock was $ 36,249,750. The Arkansas Tax Commission found the proportion of outstanding capital stock represented by property owned and used by the defendant in business transacted in the State of Arkansas for the year 1911 to be $ 13,596,520, on which the franchise tax amounted to $ 6,798.26. On May 4, 1911, the Legislature of the State of Arkansas passed Act No. 251, entitled, "An Act to provide the manner for assessing for taxation the property of railway, express, sleeping car, telegraph, telephone and pipe line companies." Acts of Arkansas 1911, page 233. This Act provides that the property of railroad corporations and the others named in the title should be assessed by the Arkansas Tax Commission. Section 1 of the Act provides that said commission shall ascertain the par value of all property, tangible and intangible, including the franchise (except the right to be a corporation), railway tracks, rolling stock, water and wood stations, passenger and freight depots, office furniture, other property real and personal owned by each of the railroad corporations having existence under the laws of this State and running through and into this State. Section 2 is as follows:

"The franchise (other than the right to be a corporation), of all railroads, express, telegraph and telephone companies, are declared to be property for the purpose of taxation and the value of such franchises shall be considered by the assessing officers when assessing the property of such corporations. In valuing for assessment purposes the property of such corporations the Arkansas Tax Commission shall determine the total value of the entire property of the corporation, tangible and intangible."

Proceeding under this Act, the Arkansas Tax Commission assessed the property of the defendant corporation within the State of Arkansas for the year 1911 in the sum of $ 11,260,244, on which defendant paid taxes for various purposes including State, county, school, road and municipal taxes to the amount of $ 239,388.84. The answer of the defendant set forth these facts and challenged the validity of Act 112 on the grounds that it amounted to double the taxation, and that it is a regulation of interstate commerce and a burden thereon. The Attorney General filed a demurrer to the answer of the defendant, which was sustained by the court. From the decree entered, the defendant has duly prosecuted an appeal to this court.

Decree affirmed.

S. H. West, Bridges & Wooldridge and Roy F. Britton, for appellant.

1. The State can not regulate, burden or tax interstate commerce, nor can it levy a tax on the privilege or right to engage in interstate commerce. 121 U.S. 230; 122 Id. 326; 127 Id. 411; 128 Id. 39; 132 Id. 472; 210 Id. 217; 193 Id. 490; 190 Id. 160; 216 Id. 146; 68 F. 183; 127 U.S. 411; 82 Id. 232; 142 Id. 339; 155 Id. 688; 127 Id. 640; 223 Id. 298.

2. The tax is invalid, because, (1) it imposes a tax on property outside the State, and (2) it imposes a tax on the interstate business of the company within the State. 216 U.S. 56; 155 Id. 688.

3. Act No. 112, in connection with Act No. 251, subjects appellant's property to double taxation. 78 Ark. 187.

Hal L. Norwood, Attorney General, and Wm. H. Rector, Assistant, for appellee.

1. The Constitution provides how foreign corporations may be authorized to do business. Art. 12, § 11; Art. 16, §§ 5, 7; 78 Ark. 187, and § 6936, Kirby's Digest, do not sustain the contention of appellant as to double taxation.

2. No charge or burden is attempted to be placed upon interstate commerce. 63 Ark. 589; 142 U.S. 217.

3. A statute requiring every corporation * * * to pay an annual tax for franchise to be determined by the amount of its gross transportation receipts, and further provides that when applied to a railroad lying partly within and partly without the State * * * the tax shall be equal to the proportion of the gross receipts in the State, * * * does not conflict with the Constitution of the United States. 142 U.S. 217. The tax was imposed upon the franchise, although based in part upon the gross receipts. 145 U.S. 23; 155 Id. 699; 158 Id. 621; 191 Id. 388; 201 Id. 296; 210 Id. 224; 165 Id. 220; 210 Id. 224-226; 223 Id. 298; 216 Id. 1; 60 L. R. A. 1.

OPINION

HART, J., (after stating the facts):

Counsel for defendant contend that it has paid its taxes under Act No. 251 of Acts of 1911, providing for the taxation of its property in the State of Arkansas, and that the imposition of a franchise tax under Act No. 112 of Acts of 1911 is invalid, but we can not agree with them in their contention. The Constitution of the State of Arkansas provides how foreign corporations may be authorized to do business in the State in the following language:

"Foreign corporations may be authorized to do business in this State under such limitations and restrictions as may be prescribed by law. Provided, that no such corporation shall do any business in this State except while it maintains therein one or more known places of business and an authorized agent or agents in the same upon whom process may be served; and, as to contracts made or business done in this State, they shall be subject to the same regulations, limitations and liabilities as like corporations of this State, and shall exercise no other or greater powers, privileges or franchises than may be exercised by like corporations of this State, nor shall they have power to condemn or appropriate private property." Article 12, section 11, of the Constitution of 1874.

Under the head of "finance and taxation," our Constitution, article 16, section 5, is as follows:

"All property subject to taxation shall be taxed according to its value, that value to be ascertained in such manner as the General Assembly shall direct, making the same equal and uniform throughout the State. No one species of property from which a tax may be collected shall be taxed higher than another species of property of equal value."

Article 16, section 7, is as follows:

"The power to tax corporations and corporate property shall not be surrendered or suspended by any contract or grant to which the State may be a party."

Our court has held that a corporation owes its existence to the State, and the right to enjoy this privilege is a subject of taxation, and that upon the power of the Legislature to impose such a tax there exists no restriction in our Constitution. In the case of a foreign corporation, the tax or license is paid for the privilege of exercising its corporate powers in the State. Baker v State, 44 Ark. 134, and cases cited. In the case of Standard Underground Cable Company v. Attorney General, 46 N.J.Eq. 270, 19 A. 733, 19 Am. St. Rep. 394, the question as to whether a certain license tax imposed upon the corporation was a tax upon corporate property was involved. The corporation insisted that the tax was a violation of that provision of the Constitution of New Jersey which provides "that property shall be assessed for taxation under general laws and by uniform rules according to its true value." The court said:...