State Board of Equalization of Wyoming v. Stanolind Oil & Gas Co.

• Court: Wyoming Supreme Court
• Writing for the Court: KIMBALL, Justice.
• Citation: State Board of Equalization of Wyoming v. Stanolind Oil & Gas Co., 51 Wyo. 237, 65 P.2d 1095 (Wyo. 1937)
• Decision Date: 02 March 1937
• Docket Number: 1990
• Parties: STATE BOARD OF EQUALIZATION OF WYOMING v. STANOLIND OIL & GAS COMPANY, ET AL

65 P.2d 1095

51 Wyo. 237

STATE BOARD OF EQUALIZATION OF WYOMING v. STANOLIND OIL & GAS COMPANY, ET AL

No. 1990

Supreme Court of Wyoming

March 2, 1937

APPEAL from the District Court, Laramie County; SAM M. THOMPSON Judge.

Proceeding by the State Board of Equalization of the State of Wyoming against the Stanolind Oil & Gas Company, a corporation, and others. From an adverse judgment, plaintiff appeals.

Judgment affirmed.

For the plaintiff and appellant, there was a brief by Ray E. Lee Attorney General; Thomas F. Shea, Deputy Attorney General and William C. Snow, Assistant Attorney General, all of Cheyenne, and oral argument by Mr. Lee.

There is no question as to the nature of the services rendered or the payment of the consideration involved in this case. The only question is, with reference to all of the defendants with the exception of the Continental Oil Company, as to whether or not such service is exempt under the sales tax statute. Transportation service does not enter into or become a component part of any commodity. Such service is not a part of the product of crude oil. The Michigan statute provides that the term "sale at retail" means any transaction transferring the ownership of tangible personal property. Act of May 24, 1935. Rule 37, established by the Michigan Board of Tax Administration, requires a sales tax to be paid upon machinery, tools, supplies, and electrical current used in the production of ore. We believe that the term "actually used in the production of or becomes an ingredient or component part of," found in our state should be construed to have the same meaning and application as is given to the Michigan statutes above referred to. Boyer-Campbell Co., et al. v. Frey, 260 N.W. 165. The point was carefully reviewed and sustained by the Michigan court in the above case. The Supreme Court of the United States in the case of Eastern Air Transport Corporation v. Tax Commission, 285 U.S. 147, recognized the application of the rule of taxation for which we are contending, namely: That materials, equipment and services purchased for operating a non-taxable business, are taxable. Interstate commerce is a non-taxable business, but the property and equipment used in furnishing interstate transportation may be taxed. In the present case, the manufacturing of the gasoline and other petroleum products is exempt, but the equipment and means used in the process of manufacturing we think are taxable when sold to the manufacturer as the ultimate consumer. With reference to the contention of the Continental Oil Company, it is our opinion that the transportation of oil by pipe line from the oil fields to the railroad is an independent transaction and is taxable. Wiloil Corporation v. Commonwealth, 294 U.S. 169; Oil Company v. State, ex rel. Knox, 280 U.S. 390; Edelman v. Boeing Air Transport, Inc., 289 U.S. 249. We think that our sales tax is a tax upon the privilege of operating a retail business in this state, and that the tax here objected to is not upon interstate commerce. State v. Regan, 298 S.W. 747; Viquesney v. Kansas City, (Mo.) 266 S.W. 700; St. Charles, ex rel. Palmer v. Schulte, (Mo.) 264 S.W. 654; Seven Springs Company v. Kennedy, 299 S.W. 792; Bradley Supply Company v. Ames, 194 N.E. 272; Franklin County Coal Company v. Ames, 194 N.E. 268. It is submitted that the transactions involved in this case are taxable under the provisions of our Emergency Sales Tax Act.

For the defendants and respondents, The Stanolind Oil and Gas Company, Standard Oil Company of Indiana, White Eagle Oil Corporation and Continental Oil Company, there was a brief by Hagens & Wehrli of Casper and oral argument by G. R. Hagens.

The mere fact that transportation services are used up and consumed by the owner of the oil transported, and do not become a component or ingredient part in tangible form of the gasoline and other petroleum products manufactured therefrom does not lift the sale of such services out of the exemption provided by section 2(f) of the act. In support of appellant's contention, its counsel have cited the case of Boyer-Campbell Company v. Frey, (Mich.) 260 N.W. 165. That case however was decided under the Michigan statute, which is entirely different from the statute in Wyoming. The Wyoming statute, section 2(f), exempts not only the sale of property but also the sale of service used in producing as well as in processing and also property and service which become an ingredient or component part of some article, substance, service or commodity manufactured or produced. Appellant's contention would nullify the express provisions of the statute. The provisions of section 2(d) of the act, which define "Wholesale Sales" as sales of tangible personal property to "Merchants, Jobbers, Dealers or other Wholesalers for resale," and exclude from the definition of the term, sales by "Wholesalers to Users or Consumers," do not nullify the exceptions contained in section 2(f) of the act. State v. Barrett, (Ind.) 87 N.E. 7; Campbell v. Jackson Bros., (Ia.) 118 N.W. 755; Merchants National Bank v. United States, 214 F. 200; Schuyler v. Southern Pacific Co., (Utah) 109 P. 458. The plaintiff, State Board of Equalization, has adopted numerous rules and interpretations of the Emergency Sales Tax Act of 1935, all to the effect that sales of services and intangible personal property are exempt when sold and consumed or used in making or producing other articles which themselves are subject to the tax. Such interpretations adopted by the board charged by the statute with its administration, are entitled to great weight and should not be overturned unless clearly erroneous. Boyer-Campbell Co. v. Fry, 260 N.W. 165; 25 R. C. L. 1042; 25 R. C. L. 1043; 59 C. J. 1025; People v. R. R. Co., (Ill.) 112 N.E. 700; Tyler v. Treasurer, (Mass.) 115 N.E. 300; Petition of Zogbaum, 32 F.2d 911; Furniture Company v. Commissioner, (Miss.) 133 So. 652; Peterson v. Guernsey, (Wyo.) 183 P. 645; State v. Krause, (Wisc.) 202 N.W. 319; U. S. v. Philbrick, 120 U.S. 52; Kern River Co. v. U.S. 257 U.S. 148; National Bank v. Missouri, 263 U.S. 641; Riley v. Thompson, (Cal.) 227 P. 772. The emergency sales tax provided by the 1935 act is clearly intended to be paid by the ultimate consumer. It was not the intention of the legislature that the ultimate consumer should be put to the necessity of paying this tax more than once, nor that he could be compelled to pay a tax upon a tax. 61 C. J. 137, 139; In re Arrott's Estate, (Pa.) 185 A. 697. The Emergency Sales Tax Act of 1935 provides for a retail sales tax. The title to the act shows that it was the intention of the legislature that this tax should apply only to retail sales in the popular sense. Commonwealth v. Milling Co., (Pa.) 167 A. 307; Buck Glass Co. v. Gordy, (Pa.) 185 A. 886; Ward v. Commissioners, (Wyo.) 256 P. 1039; Oil Company v. People, 202 P. 180; Texas Company v. State, (Ariz.) 254 P. 1060; Oil Co. v. Brodie, (Ark.) 239 S.W. 753; Pierce Oil Co. v. Hopkins, 264 U.S. 137; Standard Oil Company v. Jones, (S. D.) 205 N.W. 72. Tax statutes must be strictly construed in favor of the citizen and against the government, if there is doubt, the doubt must be resolved in favor of the tax payer. 59 C. J. 1131; 25 R. C. L. 1092; Life Assur. Soc. v. Thulemeyer, 52 P.2d 1223; U. S. v. Hurst, 2 F.2d 73; In re Stechler's Est., (Cal.) 233 P. 972; Middleton v. Lincoln County, (Miss.) 84 So. 907; Texas Co. v. Amos, (Ala.) 81 So. 471; Mills v. State, (Ga.) 125 S.E. 728; Greene v. Weller & Sons, (Ky.) 195 S.W. 422. The authorities all hold that the base to be used for computing the amount of the tax to be paid, must include all items of cost such as transportation and other items that enter into and make up the ultimate cost to the consumer purchaser. State v. Motor Company, (La.) 139 So. 61; Gee Coal Co. v. State of Illinois, 361 Ill. 293; Collins-Dietz-Morris Co. v. State Corp., (Okla.) 7 P.2d 123. In order that "labor and material" may become a component part of the ultimate structure built, and be protected under the provisions of the Federal "Heard Act," it is not necessary that such "Labor and Material" enter into the structure in tangible form or be directly incorporated therein. Any labor or material used, which directly or indirectly contributes to the completion of the work becomes a part of the finished product and comes within the meaning of the statute. U. S. F. & G. v. U.S. 58 L.Ed. 200; U. S. v. Hegman, (Pa.) 54 A. 344; U. S. v. Morgan, 111 F. 474; U. S. v. Quarry Company, 272 F. 698; Surety Co. v. Davis Company, 244 U.S. 377; Taylor v. Connet, 277 F. 945; Brogar v. Surety Co., 246 U.S. 258; U. S. v. Lawrence, 252 F. 122; U. S. v. Taylor Co., 268 F. 635; Guaranty Co. v. Crane, 219 U.S. 24; State v. Storm, (Ida.) 287 P. 689. Similarly, under the Wyoming statutes, providing for bonds on public works, labor and materials actually used or consumed directly or indirectly in the completion of the work, come within the meaning of the statute. Sec. 95-201, R. S. 1931; Franzen v. Surety Co., (Wyo.) 246 P. 30; Inv. Co. v. Casualty Co., (Utah) 293 P. 611; Eagle Oil Co. v. Altman, (Okla.) 263 P. 666. As to the Continental Oil Company, the tax does not apply as to interstate movements of freight and therefore no tax can be imposed upon the transportation charges collected for carrying oil from the Salt Creek Oil Field to the railroad at Casper, where said oil was thence carried to its originally intended destination in Denver, Colorado. 5 R. C. L. 712; 12 C. J. 25; United States v. Stockyards Co., 181 F. 625; Illinois C. R. Co. v. DeFuentes, 236 U.S. 158; U. S. v. Illinois Central R. Co., 230 F. 940; Ry. Co. v. Dreyfuss Well Co., (Ky.) 150 S.W. 321; Mill Creek Coal Co. v. Pub. Ser. Comm., (W. Va.) 100 S.E. 557. We have carefully...