State Revenue Commission v. National Biscuit Co.

• Decision Date: 16 June 1934
• Docket Number: 9982.
• Citation: 175 S.E. 368,179 Ga. 90
• Parties: STATE REVENUE COMMISSION et al. v. NATIONAL BISCUIT CO. [a1] NATIONAL BISCUIT CO. v. STATE REVENUE COMMISSION et al.
• Court: Georgia Supreme Court

175 S.E. 368

179 Ga. 90

STATE REVENUE COMMISSION et al. v. NATIONAL BISCUIT CO. ^[a1]

NATIONAL BISCUIT CO. v. STATE REVENUE COMMISSION et al.

No. 9982.

Supreme Court of Georgia

June 16, 1934

Rehearing Denied July 12, 1934.

Syllabus by the Court.

1.In the administration of the Income Tax Act of August 22, 1929(Laws 1929, p. 92)the state income taxes as imposed by the act itself should be deducted in ascertaining net taxable income.Such construction of the act is not "impracticable and mathematically impossible to enforce or administer."

2.The act permitted the deduction of state taxes, but not federal and this was so plainly and manifestly true that a taxpayer could not be relieved of liability by any interpretation rule, or conduct by a tax commissioner to the contrary.

3.The state revenue commission has the power to issue writs of fieri facias against delinquent taxpayers legally owing taxes to the state under the Georgia income tax law of 1929.The commission also has power to make an additional assessment against a taxpayer who made an erroneous or insufficient return under that statute.

4.The state revenue commission has not the power to claim and collect 1 per cent. per month as interest or penalty for taxes unpaid and claimed under the state income tax law of 1929, against a taxpayer who has not failed to make a return but has only made an erroneous return, omitting the taxes upon which the interest or penalty is claimed.Nor are the provisions of the Income Tax Act of 1931(Laws 1931[Ex Sess.]p. 24) as to penalties legally applicable to income taxes due under the prior law, where no part of the delinquent taxes was returnable or due under the later act, but all of such taxes were returnable and due under the act of 1929.

Certified Questions from Court of Appeals.

Suit between the State Revenue Commission and others and the National Biscuit Company.To review the judgment, both sides bring error to the Court of Appeals, which certifies questions.

Questions answered.

GILBERT, J., dissenting.

Lawrence S. Camp, former Atty. Gen., and W. K. Meadow and Frank A. Holden, former Asst. Attys.Gen., M. U. Yeomans, Atty. Gen., and B. D. Murphy, and Jno.T. Goree, Asst. Attys.Gen., for plaintiff in error State Revenue Commission and others.

Jones, Johnston, Russell & Sparks, of Macon, Colquitt, Parker, Troutman & Arkwright, Robt.S. Sams, and Marion Smith, all of Atlanta

p>Page (Hull, Barrett & Willingham, of Augusta, Geo. C. Palmer, of Columbus, and Alston, Alston, Foster & Moise, of Atlanta, for parties at interest, not parties to record), for defendant in error National Biscuit Co.

BELL Justice.

1.The first question propounded by the Court of Appeals is answered as follows: (1) In the administration of the Income Tax Act of August 22, 1929(Ga. Laws 1929, p. 92), the state revenue commission should construe the provisions of the act so as to allow deductions for payments of the state income taxes as imposed by the act itself.(2) Such a construction would not be "unreasonable and erroneous as being impracticable or mathematically impossible to enforce or administer."The act contains, among others, the following provisions:

"An Act to provide for levying and collecting a tax on net incomes in this State, to provide how returns shall be made, how the tax shall be paid, and to fix penalties for violation hereof; and for other purposes. * * *"

Section 1.On the net income of every person, firm, or corporation residing or doing business in this State, except insurance companies which pay to the State a tax upon premium income, after making such deductions as are allowed by the laws of the United States in the system by them adopted for determining net incomes and such increases and deductions as are hereinafter provided for in determining a proper taxable income, 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.

Sec. 2.Whenever any such person, firm, or corporation residing or doing business in this State makes an income-tax return to the United States, or is legally bound so to do, such person being hereinafter briefly referred to, for convenience, as a taxpayer, it shall be his duty to make at the same time a like return to the State of Georgia and file the same with the State Tax Commissioner for the purpose of a State tax on income.Such duplicate return shall furnish the same information as is contained in his return to the United States, shall be made on a blank form to be furnished by the Tax Commissioner, and shall ascertain the taxable net income in the same way as in the return to the United States; but before ascertaining the net income taxable by the State, the following changes shall be made:

1.To the amount ascertained under the laws of the United States as the net income taxable by the United States, there shall be added in said return the gross amount of any salary received by the taxpayer during the tax year, or accrued to him during said period as a public official or employee of the State, or of any county, municipal corporation, or other political division thereof, and the net amount of any fees, perquisites, or other emolument from said sources or any of them, paid to him during the same period for official compensation, except in the cases of the Governor of the State and of the several Judges of the Supreme Court, the Court of Appeals, and the Superior Court, who shall not be required to include their salaries paid or accruing for any term existing at the time of the passage of this Act.

2.From the amount so ascertained as the taxable net income shall be deducted any salary paid to the taxpayer by the United States or accrued to him from the same source as an official salary for any service rendered by him to the United States, and any and all interest paid to him on any bond or bonds or other obligation of the United States.

If neither of the changes indicated by subparagraphs 1 and 2 above is made, the net income taxable by the State of Georgia shall be the same as that taxable by the United States, and the tax payable thereon to the State of Georgia shall be one third of that payable to the United States.But in case the net taxable income be changed as the result of complying with subparagraphs 1 or 2 above, the tax payable to the State shall be increased or reduced so as to be one third of what would have been payable to the United States under their laws upon such increased or reduced taxable net income.

Sec. 3.Any person, firm, or corporation who makes no income-tax return to the United States because of having no sufficient income taxable by the United States to call for such return under the laws of the United States, but who would have such sufficient income if his salary, fees or perquisites from the State or subdivision thereof were taxable by the United States, shall be liable and is hereby required to make to the State of Georgia an original return on the same or similar form as would be used in making a duplicate return as required in section 2 of this Act, indicating in some appropriate way whether the same is an original return.In such case the tax liability to the State shall be one third of what it would be to the United States if said income were by them taxable.

In any case where a non-resident corporation having an office and doing business in this State makes its income-tax return in some other State, such corporation shall make an original return to the Tax Commissioner of Georgia, confined to its business done in this State, upon like principles as are in this section above provided.

Sec. 4.It shall be the right of any taxpayer making return of income for taxation by the State, to attach or add to such return any claim such taxpayer may choose to make as to any item or items included in his return to the United States which he conceives to be exempt from taxation by the State of Georgia.In such case it shall be the duty of the taxpayer so making return to make a clear and distinct statement of all relevant facts connected with such claim, and to make a clear statement of the reasons why he conceives such item to be not taxable by the State.And there shall be deducted any amount that may be derived from incomes of any such persons or companies as the State of Georgia is prohibited from taxing under the Constitution of the United States.* * *

Sec. 14.The Tax Commissioner shall have power and authority to make all necessary regulations for carrying out the provisions of this Act, provided the same are not in conflict with the provisions of this Act and do not affect any substantive legal right of the taxpayer resulting therefrom."Other provisions of the act will be noticed as occasion may require in this opinion.

For the purposes of this case it may be stated in general terms that the federal act, adopted as the pattern of the Georgia act provided that, in computing net taxable income, taxes paid or accrued to a state during the taxable year should be deducted from the gross income, but that federal taxes paid or accrued during the year could not be so deducted.26 USCA § 955.With the exception of two possible changes expressly mentioned, the Georgia act specifically declares, in section 2, that "the net income taxable by the State of Georgia shall be the same as that taxable by the United States, and the tax payable thereon to the State of Georgia shall be one third of that payable to the United States."These changes or exceptions are stated in paragraphs 1 and 2 of the same sec...