State ex rel Battle v. B. D. Bailey & Sons, Inc.

• Decision Date: 23 February 1966
• Docket Number: No. 12447,12447
• Citation: 150 W.Va. 37,146 S.E.2d 686
• Court: West Virginia Supreme Court
• Parties: STATE ex rel. G. Thomas BATTLE, State Tax Commissioner, v. B. D. BAILEY & SONS, INC.

Page 686

146 S.E.2d 686

150 W.Va. 37

STATE ex rel. G. Thomas BATTLE, State Tax Commissioner, v. B. D. BAILEY & SONS, INC.

No. 12447.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 28, 1965.

Decided Dec. 14, 1965.

Dissenting Opinion Feb. 16, 1966.

Concurring Opinion Feb. 23, 1966.

Syllabus by the Court

1. 'In considering the constitutionality of a legislative enactment, courts must exercise due restraint, in recognition of the principle of the separation of powers in government among the judicial, legislative and executive branches. Every reasonable construction must be resorted to by the courts in order to sustain constitutionality, and any reasonable doubt must be resolved in favor of the constitutionality of the legislative enactment in question. Courts are not concerned with questions relating to legislative policy. The general powers of the legislature, within constitutional limits, are almost plenary. In considering the constitutionality of an act of the legislature, the negation of legislative power must appear beyond reasonable doubt.' Point 1 Syllabus, State [ex rel. Appalachian Power Co.] v. Gainer, ect., W.Va., .

2. In considering and deciding the constitutionality of a tax imposed and collected by this state, in the light of a provision of the Constitution of the United States, this Court is bound by applicable decisions of the Supreme Court of the United States, even though such decisions are inconsistent with prior decisions of this Court.

3. A tax imposed pursuant to an act of the legislature of this state will not be held to contravene the commerce clause of Article I, Section 8 of the Constitution of the United States unless the imposition of the tax discriminates against or imposes an undue burden on interstate commerce. Such a tax will not be held to violate the commerce clause merely because it relates to or affects interstate commerce in some indirect, incidental and inconsequential manner.

4. Where a tax is imposed and collected pursuant to the provisions of Chapter 11, Article 13, Sections 2 and 2h of Code, 1931, as amended, upon the gross earnings in the form of commissions earned by and paid to the taxpayer in his business as a manufacturers' representative and merchandise broker, conducted at and from his place of business in this state, as a part of which business the taxpayer obtains from resident wholesalers and chain store operators orders for merchandise subsequently sold and shipped by the nonresident sellers to the resident buyers, the commissions being paid by the nonresident sellers to the taxpayer for its services in soliciting and obtaining orders from resident buyers and transmitting such orders to the nonresident sellers, the tax imposed on the gross earnings of the taxpayer in the form of commissions does not violate the commerce clause of Article I, Section 8 of the Constitution of the United States, notwithstanding the fact that the merchandise is shipped in interstate commerce, notwithstanding the fact that the orders for merchandise are sent by the taxpayer from this state to the nonresident sellers and notwithstanding the fact that payments of such commissions are sent from the nonresident sellers to the taxpayer at his place of business in this state.

C. Donald Robertson, Atty. Gen., Jack M. McCarty, Asst. Atty. Gen., Charleston, for appellant.

Campbell, McNeer, Woods, Bagley & Emerson, Selden S. McNeer, Jr., R. G. McNeer, Huntington, for appellee.

CALHOUN, Judge.

On May 10, 1962, in accordance with the provisions of Chapter 11, Article 1, Section 2a of Code, 1931, as amended, B. D. Bailey & Sons, Inc., filed with the state tax commissioner a petition for refund of certain taxes theretofore collected and paid under the provisions of Chapter 11, Article 13, Sections 2 and 2h of Code, 1931, as amended. On March 15, 1963, the state tax commissioner made a ruling by which the request of a refund was denied. Thereafter, B. D. Bailey & Sons, Inc., pursuant to the provisions of Chapter 11, Article 1, Section 2a of Code, 1931, as amended, requested that the state tax commissioner institute a declaratory judgment action in order that it might be determined judicially whether the taxes, or any part thereof, had been collected unlawfully.

On November 7, 1963, Honorable G. Thomas Battle, State Tax Commissioner, instituted a declaratory judgment action in the Circuit Court of Kanawha County in order to have a determination whether the taxes in question, or any part thereof, had been unlawfully collected. The case was submitted for decision upon the complaint, an answer by B. D. Bailey & Sons, Inc., and a written stipulation of facts. The circuit court held that the imposition and collection of the taxes in question contravened the commerce clause of Section 8 of Article I of the Constitution of the United States; and the circuit court, therefore, directed the state tax commissioner to refund to the taxpayer the sum of $1,125.09, the amount of taxes which were held to have been unlawfully collected.

From the final judgment of the circuit court, embodied in an order entered on June 8, 1964, the state tax commissioner has prosecuted this appeal. The case has been submitted in this Court for decision on the record made in the circuit court and upon briefs and oral argument of counsel.

B. D. Bailey & Sons, Inc., is a West Virginia corporation which, for the sake of brevity and convenience, may be referred to in this opinion merely as Bailey or as the defendant. Its business activities are conducted at and from its place of business in the City of Clarksburg, West Virginia.

In the circuit court, the state tax commissioner as the plaintiff and Bailey as the defendant in the declaratory judgment action entered into a written stipulation of facts, a portion of which is as follows:

'That the Defendant was and is, and specifically during the years 1959, 1960, and 1961, engaged in the business of acting as manufacturer's representative and merchandise broker, under a franchise or contract arrangement, whereby the said manufacturer's representative and merchandise broker was granted the right by certain manufacturers and food processors to represent exclusively such manufacturers and food processors within a certain geographical area in the State of West Virginia, which area is specifically set forth in the said franchise or contract; that such franchise or contract provides for the commissions to be paid the said manufacturer's representative and merchandise broker by the manufacturer or food processor; that certain of the said manufacturers and food processors are located in the State of West Virginia and certain of them are located outside the State of West Virginia; that the defendant's business activities consist of soliciting orders of merchandise for the said manufacturers and food processors from wholesalers and chain-store operators located in West Virginia; that the Defendant, after securing such orders, sends them on to the manufacturer and food processor, who reserves the right to accept or reject such orders, and upon acceptance fills the orders and arranges for delivery of the merchandise by common carrier, F. O. B. point of shipment, to the purchaser in West Virginia; that any loss of merchandise in shipment is borne by the purchaser, with the manufacturer and food processor, as a courtesy, processing the claims for such loss against the common carrier and the original merchandise or its replacement being ultimately delivered to the purchaser in West Virginia; such purchaser being the said wholesaler or chain-store operator located in West virginia; that all of the Defendant's business activities of soliciting, securing, and preparing merchandise orders takes place entirely within the State of West Virginia; that the billing for such merchandise is sent directly to the said West Virginia purchaser by the manufacturer and food processor and payment is made by the said purchaser directly to the manufacturer and food processor; that none of the said merchandise involved in the above-described activity has ever been purchased in the name of or by the Defendant; that the Defendant's business activity and the gross receipts upon which taxes have been paid and which the Defendant alleges have been unlawfully exacted has been exclusively between citizens and business firms, that is, manufacturers and food processors located outside the State of West Virginia on the one hand, and citizens and business firms, that is, wholesalers and chain-store operators, located within the State of West Virginia on the other hand; and that all of the Defendant's income and gross receipts are in the form of commissions received from the said manufacturers and food processors for the performance by the Defendant of the said business activities.

'That approximately 90 per cent of the Defendant's gross business is transacted with those manufacturers or food processors located outside the State of West Virginia.'

The taxes in question were levied and collected pursuant to the following statutory provisions:

'(2) Imposition of Privilege Tax.--There is hereby levied and shall be collected annual privilege taxes against the persons, on account of the business and other activities, and in the amounts to be determined by the application of rates against values or gross income as set forth in sections two-a to two-j, inclusive, of this article.'

'(2h) Service Business of Calling not Otherwise Specifically Taxed.--Upon every person engaging or continuing within this state in any service business or calling not otherwise specifically taxed under this law, there is likewise hereby levied and shall be collected a tax equal to one and five one-hundredths per cent of the gross income of any such business.'

The taxes involved in this case have been levied and paid exclusively on the gross amount earned by Bailey, during the period of time in question, in the form of...