State Tax Comr. v. Central Greyhound Lines

• Decision Date: 12 January 1934
• Citation: State Tax Comr. v. Central Greyhound Lines, 252 Ky. 300, 67 S.W.2d 35 (Ky. 1934)
• Parties: State Tax Commission et al. v. Central Greyhound Lines.
• Court: Supreme Court of Kentucky

252 Ky. 300

State Tax Commission et al. v.Central Greyhound Lines.

Court of Appeals of Kentucky.

Decided January 12, 1934.

1. Taxation. — Bus company doing interstate business held subject to franchise tax for proportion of franchise located in state, to be measured by proportion of its busses employed regularly therein (Ky. Stats., sec. 4077 et seq.; Constitution U.S. Amend. 14, sec. 1).

2. Commerce. — Tax on proportion of franchise of bus company doing interstate business measured by number of busses regularly employed in state held not violative of interstate commerce clause of Federal Constitution (Ky. Stats., sec. 4077 et seq.; Constitution U.S. art. 1, sec. 8, cl. 3).

Appeal from Franklin Circuit Court.

BAILEY P. WOOTTON, Attorney General, and S.H. BROWN, Assistant Attorney General, for appellants.

R.W. KEENON and R.H. TOMLINSON for appellee.

OPINION OF THE COURT BY JUDGE THOMAS.

Reversing.

The appellant and one of the defendants below, State Tax Commission of the Commonwealth of Kentucky, pursuant to the provisions of section 4077 et seq. of our present Statutes, assessed against the appellee and plaintiff below, Central Greyhound Lines, intangible property owned by it in this state in the form of a franchise for the taxation of which provisions are made by the Statutes, supra.

The valuation of the property so assessed was fixed by defendant at $25,000, and, contending that it was not liable for the tax, and that to enforce its collection would be taking its property without due process of law contrary to section 1 of the Fourteenth Amendment to the Federal Constitution, and that the tax would be a burden on interstate commerce, plaintiff filed this action in the Franklin circuit court against the above defendant ant, J. Dan Talbott, auditor of public accounts for the commonwealth, seeking to enjoin them from enforcing the collection of any tax upon the assessment so made, and from certifying any proportionate part of it to any governmental subdivision through which plaintiff operated its passenger bus line in this commonwealth, for taxation by it or them.As grounds therefor it alleged in its petition that it was a foreign corporation operating a passenger bus line between the cities of Cincinnati, Ohio, and Louisville, Ky., by far the greater portion of which was and is in this commonwealth and the business transacted over and upon its public highways; that it was a foreign corporation, having been organized under the laws of the state of Ohio, with its home office in the city of Cleveland in that state; that it owned no tangible property whatever in this state, but that it employed daily in the prosecution of its passenger-carrying business in this commonwealth from two to four passenger busses and which number were practically continuously in this state and devoted to such employment; that all the busses owned by it, including those employed in this commonwealth, had a taxable situs in the state of Ohio; and that plaintiff assessed them in that state and paid taxes therein.It admitted that it had complied with all regulatory statutes in this commonwealth to entitle it to operate its business as an interstate carrier of passengers in which it was engaged.Defendants demurred to the petition which the court overruled, and they declining to plead further, the injunction prayed for was granted and, complaining thereof, they prosecuted this appeal.

It is correctly stated in the brief of learned counsel for plaintiff that "the sole and only question involved in this controversy is, whether or not an interstate bus operator is liable for a franchise tax to the state of Kentucky."The correct answer to that question is determinable from the facts, and adjudicated principles of law applicable thereto.But, before we attempt an answer, it is necessary to focus our attention to the precise and exact question involved and which, when done, will eliminate from the case much of what we conclude are immaterial principles discussed in briefs, and in the cited cases in support thereof.Such precise and exact question is: Whether plaintiff has property in this commonwealth having a taxable situs therein and, if so, is it immune from payment of ad valorem taxes at such situs in this commonwealth because its owner is a nonresident, and the property is employed exclusively in interstate commerce?That narrowing of the question excludes all others, such as the right of a state to license or tax a foreign corporation for permission to conduct business within its territory, and it also excludes from consideration its right to tax the property of a foreign corporation (whether engaged in interstate commerce or not) that may be only temporarily within the jurisdiction of the taxing state and which has not acquired, under any legal principle, a permanent situs within that jurisdiction, but only a casual and temporary one in passing through it as a means of conducting the business in which it is employed by the owner.It also excludes all police license fees and charges.With those questions eliminated, the exact one for determination is greatly reduced and because of which a large portion of appellee's argument becomes inapplicable.

In an unbroken line of cases coming before us since the enactment of the statute, supra, we have held that the tax thereby imposed, and which for lack of a better name has been designated as a "franchise" tax, has been held to be a property tax subject to ad valorem taxation the same as is tangible permanently located property within the commonwealth.Some of the cases in which that conclusion was approved are: James, Auditor, v. Kentucky Refining Co., 132 Ky. 353, 113 S.W. 468;Bosworth, Auditor, v. Evansville & Bowling Green Packet Co., 178 Ky. 716, 199 S.W. 1059;Chesapeake & Ohio Railway Co. v. Commonwealth, 190 Ky. 552, 228 S.W. 15;Commonwealth v. Southern Railway Co., 193 Ky. 474, 237 S.W. 11; Commonwealth, by, etc., v. Atchison, Topeka & Santa Fe Railroad Co., 214 Ky. 339, 283 S.W. 119, 121;Baltimore & Ohio Southwestern Railroad Co. v. Commonwealth, 177 Ky. 566, 198 S.W. 35;Blue Coach Lines, Inc., v. Lewis, 220 Ky. 116, 294 S.W. 1080.Many prior ones to the same effect are cited in those opinions.Those cases as well as the one of Adams Express Co. v. Ohio State Auditor, 166 U.S. 185, 17 S. Ct. 604, 41 L. Ed. 977, uphold the right of a state to localize its proportionate part of the valuation of the taxpayer's franchise that may have a situs for taxation within its boundaries and which is ascertained with the aid of certain rules and formulas with which we are not at this point concerned, since no complaint of the method employed herein is made.We do not understand learned counsel to contend otherwise, but they argue: (1) That, since the petition states that their client has no tangible property in Kentucky, and pays taxes on all such property (as well as upon its intangible franchise property) in the state of Ohio, it necessarily follows that it has no intangible taxable property in this jurisdiction; and (2) that the imposition of the tax would be a burden on interstate commerce, which the commonwealth of Kentucky, under the Federal Constitution(art. 1, sec. 8, cl. 3), is without authority to impose, and we will now direct our attention and confine our discussion to those two arguments.

Argument 1 is chiefly sought to be sustained by the case of Commonwealth v. Lee Line Co., 159 Ky. 476, 167 S.W. 409, 410.The commonwealth in that case sought to tax the Lee Line Company for the proportionate part of its intangible franchise property alleged to have had a permanent situs in this state, under the same statutessupra; but the facts were that the appellee therein owned and operated steamboats on navigable streams bordering this commonwealth, and which, so far as maritime matters are concerned, were within the exclusive jurisdiction of the federal government.It did not own any physical or tangible property in this jurisdiction having a taxable situs therein, nor did it appropriate any of the public highways of the state in the conduct of its business, nor did it do so upon any other space or territory over or upon which Kentucky could exercise jurisdiction regulating its business.That fact was emphasized in the opinion when it said: "It [Lee Line Company] operates a line of boats along navigable waters lying between this and other states.This right of navigation is not conferred by or under the control of this state, but is subject to federal control alone."Other expressions in that opinion (with the one we have inserted) make it clearly apparent that, since the business there being conducted was not under the supervision or control in any respect of Kentucky, but was operated exclusively upon and over territory entirely under the control of federal jurisdiction, it could be operated without obtention of any sort of right or...