State ex rel. Knox v. Panhandle Oil Co.
| Decision Date | 25 April 1927 |
| Docket Number | 26366 |
| Citation | 112 So. 584,147 Miss. 663 |
| Court | Mississippi Supreme Court |
| Parties | STATE ex rel. KNOX, ATTY.-GEN., v. PANHANDLE OIL CO. [*] |
Suggestion of Error Overruled May 16, 1927.
APPEAL from circuit court of Hinds county, First district HON. W. H POTTER, Judge.
Suit by the state, on the relation of Knox, attorney-general, against the Panhandle Oil Company. From a judgment overruling a demurrer to the special plea of defendant complainant appeals. Reversed and judgment rendered.
Judgment reversed.
J. L. Byrd, Assistant Attorney-General, for appellant.
The only questions in this case, as we see it, are whether or not the gasoline tax is a privilege tax or an excise tax, or whether it is a property tax; and whether or not the tax is on the dealer or on the merchandise. We concede the law to be that no tax can be laid upon an instrumentality of the Federal Government, and we concede the law further to be that if the tax is a tax on the article and not on the dealer of the article, that it is not a privilege tax.
We contend, however, that levy of a tax on an article used by an instrumentality of the Federal Government is not a tax upon the instrumentality itself, but is a tax upon the dealer. The first tax on the privilege of handling gasoline is found in chapter 116, Laws of 1922.
By chapter 115, Laws of 1924, the legislature reiterated its intention to tax the privilege of distributing gasoline, and increased the tax but left the verbiage of section two of that act just as it was in chapter 116, Laws of 1922.
By chapter 119, Laws of 1926, the legislature increased the tax, but by the title of the act and by section 2 of that act declared that the business of distributing gasoline is a privilege and that for such privilege every distributor or dealer should pay a privilege tax; but the Act of 1926 went further and imposed an excise tax upon the use of gasoline by persons in motor driven vehicles upon the public roads where the tax had not been paid theretofore.
The legislative intent was to levy a privilege tax upon the person dealing in gasoline, and to hold otherwise would be to give to the legislative act a meaning not found in the act and a meaning absolutely contrary to the declared meaning of the legislature as shown by the act. In Bowman, Attorney-General, v. Continental Oil Company, 65 L.Ed. 1139, the supreme court upheld the New Mexico gas tax. The same questions were raised in that case as are raised here.
The levying of a privilege tax and the fixing of the amount of the privilege according to the amount of any commodity sold, is not a new thing in this state. Section 3498, Code of 1906, as amended imposed a tax on canning factories. The constitutionality of this act was challenged in Barataria Canning Company v. State ex rel., 101 Miss. 890. The act, chapter 192, Laws of 1908, fixed the additional privilege license at three cents per barrel just as the gasoline tax to be paid by the gasoline dealer is fixed at four cents per gallon.
The supreme court of the United States has held that a privilege tax levied on a person or corporation doing business with the United States Government or one of its instrumentalities, is not a tax upon that instrumentality and is not void on that account. Fidelity & Deposit Company of Maryland v. Commonwealth of Pennsylvania, 60 (U.S.) L.Ed. 664; Metcalf v. Mitchell, 70 L.Ed. 384.
The cause should be reversed and judgment entered here.
George Butler, for appellee.
The question is whether chapter 116, Laws of 1922, chapter 115, Laws of 1924, imposing a tax of three cents per gallon on gasoline, is applicable: (a) To gasoline sold by appellee to the United States Government for its Coast Guard Fleet of boats; and (b) To gasoline sold by appellee to the United States Government for the United States Veterans Hospital. We say that under a proper interpretation of the act in question the tax thereby imposed is not applicable to the gasoline sold to and issued by the United States Government for either of the purposes.
While section 2 of the act purports to impose a tax upon the dealer or distributor for the privilege of engaging in the sale of gasoline, it is apparent by reading the act as a whole, that the tax is not upon the dealer or distributor, but is a tax on the gross sales of the gasoline. The gasoline is liable for the tax and the tax is laid upon the gasoline. Moreover, the act shows that it was not the intention to impose an occupation tax measured by the volume of sales or stocks, such as is imposed on stores or other businesses, because the legislature recognized that the imposition of this tax upon sales and transactions in interstate commerce would be a direct burden upon such commerce, and exempted, from the operation of the statute, such sales. In this respect, the statute is similar to that involved in Texas Company v. Brown, 258 U.S. 466, 66 L.Ed. 721.
Again, the payment of the tax is not a condition precedent to the right to do business. The validity of this kind of a tax is upheld on the theory that it is a license fee or tax upon a vehicle, measured by the use of the highway. Blashfield's Ency. of Automobile Law, page 2484. See Opinion of the Justices, 81 New Hampshire, 552, relating to a flat rate of two cents per gallon on gasoline or motor fuel sold in the state.
To the same effect is Gaffill v. Bracken, 195 Ind. 551, 145 N.E. 313; Standard Oil Company v. Broddie, 153 Ark. 114; Altitude Oil Company v. People, 70 Cal. 452, 202 P. 180; State v. Lawrence, 108 Miss. 292; Bowman v. Continental Oil Co., 256 U.S. 642, 65 L.Ed. 1139.
Tested by the decisions of this state and of the supreme court of the United States, the tax here imposed is a direct burden. Knox v. R. R., 138 Miss. 70; State v. Lawrence, 105 Miss. 58; Thompson v. Kreutzer, 112 Miss. 165; Thompson v. McLeod, 112 Miss. 383; C. R. I. & P. R. R. Co. v. Robinson, 122 Miss. 417; Grocery Company v. Robinson, 126 Miss. 34; Barnes v. Jones, 139 Miss. 675.
It will thus be seen that under the Mississippi authorities the tax here imposed is a direct burden, because it is a tax on sales without reference to gains or profits and a direct burden upon the user of the gasoline. There is no agency intervening between the retailer and the government. There is no opportunity to distribute the burden. It falls immediately and directly upon the consumer.
The Federal cases are all to the effect that the tax in question is a direct tax. To construe the act as imposing the tax on the gasoline in question, or upon the sales of the gasoline in question would render it ineffective. McCullouch v. Maryland, 4 Wheat. 429 in Osborn v. Bank, 9 Wheat. 867; Brown v. Maryland, 25 U.S. 444, 6 L.Ed. 678; Weston v. Charleston, 27 U.S. 449, 7 L.Ed. 481; Dabbs v. Erie Co., 4 U.S. 435, 10 L.Ed. 1022; Almy v. California, 65 U.S. 169, 16 L.Ed. 644; Northern Central R. R. v. Jackson, 74 U.S. 262, 19 L.Ed. 888; Cook v. Pennsylvania, 97 U.S. 566, 24 L.Ed. 1025; Philadelphia v. Pennsylvania, 122 U.S. 326, 30 L.Ed. 1200; Leloup v. Mobile, 127 U.S. 640; Western Union Tel. Co. v. Texas, 105 U.S. 460, 26 L.Ed. 1067; Williams v. Talledega, 226 U.S. 402, 57 L.Ed. 275.
That a gross sale or a gross income tax is a direct tax is conclusively established by the supreme court of the United States. Under the commerce clause, the states may not unduly burden interstate commerce by taxation or otherwise. And in the cases cited below, the supreme court has held that a gross sale or gross income tax is a direct burden and consequently void. Crew Lewick & Co. v. Pennsylvania, 245 U.S. 288, 62 L.Ed. 292; U. S. Glue Co. v. Oak Creek, 247 U.S. 321, 62 L.Ed. 1135. See, also, Shafer v. Carter, 252 U.S. 137, 64 L.Ed. 445; Miller v. I. C. R. R., 111 So. 558.
If it is a direct tax and directly and unduly burdens interstate commerce when applied to such transactions, then manifestly it is such a direct burden on the Federal Government as to fall within the rule clearly illustrated in Gillespie v. Oklahoma, 257 U.S. 501, 66 L.Ed. 338, to the effect that the criterion of interference by the state with interstate commerce is one of degree, while the rule as to instrumentalities of the United States on the other hand is absolute in form at least stricter in substance.
Coming now to the cases involving the imposition of a tax on the Federal Government or its instrumentalities, it will be seen that they are immune from any direct burden whatsoever. Choctaw R. R., etc. v. Harrison, 235 U.S. 292, 59 L.Ed. 235; Indian Territory Oil Co. v. Oklahoma, 240 U.S. 522, 60 L.Ed. 779; Gillespie v. Oklahoma, 257 U.S. 501, 66 L.Ed. 338; Johnson v. Maryland, 254 U.S. 51, 65 L.Ed. 128.
If the act is to be construed as applying to the sales in question, so much of it as is so applied should be stricken down under the principles announced in Bowman v. Continental Oil Co., 65 L.Ed. 1139, 256 U.S. 642, and Texas Company v. Brown, 258 U.S. 466; 66 L.Ed. 721.
Argued orally by J. L. Byrd, Assistant Attorney-General, for appellant, and George Butler, for appellee.
The suit is by the attorney-general, for the state, to recover about five thousand dollars from the appellee, Panhandle Oil Company, as taxes due by the oil company for the sale of gasoline, under chapter 115 of the Laws of 1924 and chapter 119 of the Laws of 1926, the verbiage of which is the same, and provides, in part, as follows:
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