State Revenue Commission v. Edgar Bros. Co.

• Decision Date: 11 November 1937
• Docket Number: 11864.
• Citation: 194 S.E. 505,185 Ga. 216
• Parties: STATE REVENUE COMMISSION v. EDGAR BROS. CO.
• Court: Georgia Supreme Court

194 S.E. 505

185 Ga. 216

STATE REVENUE COMMISSION v. EDGAR BROS. CO.

No. 11864.

Supreme Court of Georgia

November 11, 1937

Rehearing Denied Dec. 9, 1937.

Certiorari to Court of Appeals.

Proceeding by the State Revenue Commission against Edgar Bros. Company. To review a judgment, 55 Ga.App. 505, 190 S.E. 623, affirming a judgment for defendant, plaintiff brings certiorari.

Reversed with directions.

RUSSELL C.J., dissenting.

Syllabus by the Court.

1. The Georgia Income Tax Act of 1931, Ga.L.Ex.Sess.1931, pp. 24 51, does not place a period of limitation upon the enforcement of an assessment or execution for taxes imposed under the act of 1929, Ga.L.1929, p. 92, but places a period of limitation only on the assessment and collection of taxes imposed by the act of 1931.

2. By a proper construction of section 3 of the act of 1929, in its relation to the act as a whole, it imposes an income tax on nonresident corporations doing business in this State, based upon the entire net income of such corporations, but apportioned to that part of such income as is attributable to business done in this State.

3. By section 3 of the act of 1929 such taxpayer is required, in addition to a return showing its entire net income from all sources, to make a return showing the proportionate part of such income attributable to business done in this State. The statute therefore sets forth a method of apportionment; and in the event the taxpayer fails to make the return required in section 3 of the act, the commission is authorized to make such apportionment from the best information obtainable.

M. J. Yeomans, Atty. Gen., O. H. Dukes and Marshall L. Allison, Assts. Atty. Gen., for plaintiffs in error.

Park & Strozier and Orville A. Park, Jr., all of Macon, for defendant in error.

HUTCHESON Justice.

This case comes to this court on the grant of a writ of certiorari to the decision of the Court of Appeals, 55 Ga.App. 505, 190 S.E. 623, 924. The facts and issues as stated by the Court of Appeals are as follows: 'On August 28, 1935, the State Revenue Commission issued an execution against Edgar Brothers Company for income taxes alleged to be due the state for the year ending December 31, 1929. The defendant in fi. fa. filed an affidavit of illegality averring, in part, that the claim and reassessment was barred by the statute of limitations; and that it was not subject to income tax, under the act of 1929, on business done in Georgia. The State Revenue Commission filed a traverse of the affidavit of illegality. The case was submitted to the judge without the intervention of a jury. The court held: (1) That 'the assessment and execution issued thereon by the plaintiff against the defendant is barred by the statute of limitations;' and (2) that under the 'act of the legislature of 1929, the plaintiff is not authorized to assess the income tax against the defendant, for the reason that the facts in this case show that the income derived from the operation of the defendant's plant, as described in the pleadings, depended on the sale of the manufactured products after they arrived in other States;' and that the act of 1929 did not contain sufficient provisions for reaching income derived from such source. On this judgment the plaintiff in fi. fa. assigns error.' 'The substance of the defendant's affidavit of illegality, so far as it relates to this second issue, is that it is a corporation of New Jersey; that its principal or home office and place of business is in New Jersey; that its books and records are kept there and its business transacted there; that it owns certain lands and mineral rights in Georgia and mines clay thereon, all of the clay being shipped out of the state of Georgia on orders taken by the company at its principal or home office in Metuchen, N. J., and at its sales office in the city of New York; that its mining operations are in charge of a superintendent, but it has no officer and no business office in Georgia; that it pays its employees, and for supplies, materials, and fuel, and all other expenses, from moneys sent from the principal or home office of the company at Metuchen, N. J., no money being received or handled by any office or officer in Georgia from the sale of any of the clay mined in Georgia; that orders are taken and clay is sold by the company through its officers at a sales office in the city of New York and the home office in Metuchen, N. J., and clay to fill the orders so taken is shipped from the mines in Georgia as directed by the Metuchen office; that bills for the clay sold are sent out from, and are due and payable at, the Metuchen office, and are collected there, and not in or through any office or officer in Georgia. The clay is shipped to other states, but none of it is shipped to any point in Georgia or sold to any customer domiciled or doing business in Georgia; * * * that the defendant company operates a commissary in connection with its mines, and that it has returned and paid the state of Georgia the income tax on the profit made in the operation of the commissary for the year 1929. * * * It is undisputed that the property tax has been paid on the real estate, mines, machinery, and equipment in Georgia, and that the income tax on the income from the commissary has been paid. The issue in this case is as to the tax on the income received from selling the product of the mines in other states.'

It may be stated here that the allegations contained in the affidavit of illegality and the evidence show that the defendant in fi. fa. has a local office in the State of Georgia where records are kept showing the quantity of clay mined and shipped; records of pay roll accounts with its employees; and from which purchases of materials, supplies, and fuel are made, for use in its operations in Georgia. All money is, however, paid from its home office.

The Court of Appeals sustained the judgment of the trial judge, holding: (1) 'Since the 1929 act (with the exception of the assessment and collection of taxes accrued thereunder prior to the effective date of the 1931 act) was expressly repealed by the act of 1931, thus leaving the 1931 act as the only State income [tax] law in force; and the repealing of the 1929 act and passage of the 1931 act showing that the former act was defective, incomplete, or for some reason unsatisfactory to the Legislature, and since the 1929 act failed to provide for any period of limitation, and the 1931 act corrected this defect and provided a period of limitation, and also provided for the assessment and collection of a 'deficiency' in the tax imposed by 'any prior act,' and defined the word 'deficiency' as meaning the amount by which the tax imposed by this act [1931] 'or any prior act' exceeds the amount shown as the tax by the taxpayer upon his return, and this provision of the act of 1931 being remedial, and the execution of the plaintiff in fi. fa. issued August 28, 1935, being issued after the three-year period of limitation prescribed in the act of 1931, the execution is barred by the statute of limitations.' (2) 'The phrase 'confined to its business done in this State,' as used in the act of 1929, means intrastate business and not interstate business," for which reason the act of 1929 was too indefinite in not having incorporated sufficient provisions for reaching income derived from the sale in order States of products manufactured in this State, but only taxed a nonresident corporation doing business in this State on its income arising only from business done in this State. On these rulings of the Court of Appeals the State Revenue Commission assigns error.

1. The Income Tax Act of 1929, p. 92 et seq., provided no period of limitation on the assessment or issuance of an execution for taxes imposed by the act. Section 1 of the act in providing that 'there shall be levied and collected by the State of Georgia an income tax similar to that of the United States, but at the rate and according to the scale hereinafter set forth; the same to be returned, calculated, ascertained, and paid according to the system and rules hereinafter set forth,' did not adopt the limitations provisions of the Federal Income Tax Act then in force. There is a distinct difference in levying and collecting a similar tax and in levying and collecting a tax in a similar manner. Does the act of 1931, Laws 1931, Ex.Sess., p. 24 et seq., place any limitation on the collection of taxes imposed under the act of 1929? The act of 1931 expressly repealed the act of 1929, section 62, p. 59; but provided that the act of 1929 'shall remain in force for the assessment and collection of all taxes which have accrued or may accrue under the income-tax Act of 1929 and for the collection of all penalties which have accrued or may accrue in relation to said Act.' Section 63, p. 59. This provision neither added to nor took away from or made any change in the status of taxes accrued and accruing under the act of 1929 in so far as it related to limitations on the collection thereof. Section 35(a) of the act of 1931 declares that: 'As soon as practicable after the return is filed, the commissioner shall examine it and shall determine the correct amount of tax. If the commissioner determines that there is a deficiency in respect of the tax imposed by this Act or any prior act, the commissioner is authorized to send notice of such deficiency to the taxpayer by registered mail. * * * No assessment of a deficiency in respect to the tax imposed by this Act or any prior Act, and no proceeding in court for its collection, shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer,' etc.

Subsection (f) of section 35 declares: 'As used in this Act, the word 'deficiency' means--the...