Standard Oil Co. v. Stone

• Decision Date: 12 May 1941
• Docket Number: 34572.
• Citation: 2 So.2d 155,191 Miss. 897
• Court: Mississippi Supreme Court
• Parties: STANDARD OIL CO., Incorporated In Kentucky, v. STONE, Chairman State Tax Commission.

2 So.2d 155

191 Miss. 897

STANDARD OIL CO., Incorporated In Kentucky, v. STONE, Chairman State Tax Commission.

No. 34572.

Supreme Court of Mississippi

May 12, 1941

Lyell & Lyell, of Jackson, for appellant.

J H. Sumrall, of Jackson, for appellee.

McGEHEE Justice.

The principal question for decision on this appeal involves the constitutionality of an amendment of Sec. 9 of Chap. 119 Laws of 1934, by Sec. 7 of Chap. 113, Laws of 1938, known as the "Sales Tax Law", whereby it is claimed that the appellant is deprived of its property without due process of law in that the amendment makes the property of the appellant as a lessor subject to a 2% retail sales tax due by its lessees; and which provides, among other things, that "where premises are equipped with permanent fixtures so that no other commodity than that sold by the owner of said premises can be sold or handled thereat; and the nature of the commodity sold is such that an amount thereof sufficient to cover the tax accrued for one month is not kept on hand at any one time; and such premises are leased or rented by the owner to persons who do not pay all taxes accrued on account of the business conducted on such premises when due; then such place of business, including the fixtures used in such business, shall be liable to seizure and sale under a warrant issued by the commissioner, when taxes accrued upon business conducted upon such premises become due and unpaid."

The suit was instituted by a declaration filed by the appellant in four counts to recover sales taxes paid under protest by the appellant on behalf of four of its lessees on retail sales of gasoline alleged to have been purchased by the lessees from the appellant and sold at filling stations whereas the equipment and fixtures were owned by the appellant and leased to the lessee named in each count of the declaration respectively, and which taxes the lessee in each instance had failed to pay as required by law.

The quoted amendment to the statute was approved on April 4 1938, whereas the tax sought to be recovered by the appellant on the first count of the declaration covers the period beginning January 1, 1938, and ending July 31, 1938, but it is not alleged as to what portion of the amount sought to be recovered was for sales made prior to April 4, 1938. A demurrer was sustained to this count of the declaration, and from that action of the court below the oil company appeals. In the second count of the declaration, the tax sought to be recovered was for sales made for the period subsequent to the adoption and approval of the said amendment; and this is likewise true as to the tax sought to be recovered under the third count thereof. Whereas, under the fourth count of the declaration, a part of the tax sought to be recovered was for sales made prior to the adoption and approval of the amendment, and the remainder subsequent thereto. It was alleged, however, in the said second, third and fourth counts that the lessee always had on hand commodities which he sold on the leased premises in an amount sufficient to cover the tax accrued for any month for the period involved in the demand and in which the tax accrued. Demurrers to each of these last three counts were overruled, and the appellee has prosecuted a cross-appeal on account thereof.

It follows from the foregoing statement of the pleadings that the appellant's property would not be liable to seizure and sale for the tax on any sales made by its lessees thereof which accrued and became payable prior to April 4, 1938; and also that the demurrers to the second, third and fourth counts were properly overruled in view of an allegation therein to the effect that a sufficient amount of gasoline was kept on hand at any one time to cover the tax accrued for the month for which it was assessed, the non-existence of which fact was necessary to render the place of business, equipment and fixtures of the lessor subject to seizure and sale.

For the purposes of this decision, we shall assume that the allegations of the declaration are sufficient to show that the premises and fixtures used in connection with the sale of the gasoline, and which were threatened to be seized and sold for the payment of the tax, were in truth and in fact the property of the appellant oil company; that they were leased to the named lessees respectively; and that the gasoline sold to the said lessees and on which the sales tax was unpaid had been paid for by them when delivered by the appellant, and that the gasoline therefore belonged to the lessee at the time it was sold at retail. Also, that the property of the appellant threatened to be seized and sold for the payment of the tax sued for under the first, third and fourth counts of the declaration, included the land as well as the fixtures used in the operation of the place of business. Nevertheless, we are not unmindful of the fact, since it is a matter of common knowledge, that the appellant, as a major oil company, selects the location where the products are to be sold by its lessees, designs the equipment and fixtures in which the products are to be handled, labels the same so as to designate the commodity offered for sale as a Standard Oil Company product, controls the business to the extent that the products in which the lessor is interested are exclusively sold by the lessees while using such equipment and fixtures, and is to that extent interested in the conduct of the business and in the volume of sales made at the premises where the leased equipment and fixtures are located; and that while the tax is on the proceeds of the sales of the product, it is levied and assessed in this instance for the privilege of conducting a business in which the lessor of the premises, equipment and fixtures is interested to the extent aforesaid.

It will be noted that the statute, in providing that "where premises are equipped with permanent fixtures so that no other commodity than that sold by the owner of said premises can be sold or handled thereat," makes no mention of filling stations as such by name. It is conceded by the appellee, however, that while the provision of the statute subjecting to seizure and sale the place of business including the fixtures used in such business under the circumstances above mentioned may apply to premises and fixtures other than those used for the distribution of petroleum products, this amendment to the statute was directed primarily at filling stations leased to persons who had theretofore failed to pay the retail sales tax on the sales of such products, and who had no property against which the collection thereof could be enforced by seizure and sale. Wherefore, the appellant contends that the provision is discriminatory if enacted solely for that purpose. Thus there is presented the question as to whether or not the legislature had a substantial basis for differentiation on which to constitutionally declare such a discrimination. The rule is announced in 6 R.C.L. 384 that "the question of classification is primarily for the legislature, and it can never become a judicial question except for the purpose of determining, in any given situation, whether the legislative action is clearly unreasonable. * * * When the classification in law is called in question, if any state of facts reasonably can be conceived that would sustain it, the existence of that state of facts at the time the law was enacted must be assumed. The courts cannot require the legislature to specify its reasons for the classification, but they will always presume that the legislature acted on legitimate grounds of distinction, if such grounds exist." It was...