Stone v. Dunn Bros., Inc., 39731

• Decision Date: 13 June 1955
• Docket Number: No. 39731,39731
• Parties: A. H. STONE, Chairman, State Tax Commission, Revived as Alex McKeigney, Chairman of State Tax Commission, v. DUNN BROTHERS, Inc.
• Court: Mississippi Supreme Court

Page 802

80 So.2d 802

224 Miss. 762

A. H. STONE, Chairman, State Tax Commission, Revived as Alex McKeigney, Chairman of State Tax Commission, v. DUNN BROTHERS, Inc.

No. 39731.

Supreme Court of Mississippi.

June 13, 1955.

Suggestion of Error Overruled July 15, 1955.

See 81 So.2d 712.

John E. Stone, Jackson, for appellant.

Butler, Snow, O'Mara, Stevens & Cannada, Jackson, for appellee.

LEE, Justice.

This is an appeal by A. H. Stone, Chairman of the State Tax Commission, from a judgment of the circuit court of the First Judicial District of Hinds County, requiring him to refund to Dunn Bros., Inc., the sum of $557.93.

The controversy arose in this way: The tax commission demanded of Dunn Bros., Inc., the payment of $557.93, being a sales tax of two percent on its gross income of $27,896.45, from its operation entirely within the State of Mississippi. The corporation paid the assessment, under protest, and then brought this action to recover, with the above mentioned result.

After the case reached this Court, A. H. Stone died; and Alex McKeigney has succeeded to the office, and the cause has been revived in his name.

The statutes under which this tax was demanded and collected are Sections 10105 and 10109, Code of 1942. Section 10105 is as follows: 'There is hereby levied and shall be collected annual privilege taxes, measured by the amount or volume of business done, against the persons, on account of the business activities, and in the amounts to be determined by the application of rates against values, or gross income, or gross proceeds of sales, as the case may be, as follows'.

The applicable part of Section 10109 is as follows: 'Upon every person engaging or continuing within this state in the business of operating an express business, transporting freight or passengers from one point to another in this state, there is likewise hereby levied and shall be collected a tax, on account of the business engaged in, equal to two per cent of the gross income of the business. * * * There shall be excepted from the gross income used in determining the measure of the tax imposed in this section so much thereof as is derived from the business conducted in commerce between this state and other states of the United States.'

The cause was tried upon an agreed statement of facts in substance as follows: During the year 1951, Tennessee Gas Transmission Company was constructing an extension to its pipe line, which crossed several states, including the State of Mississippi. It purchased the necessary pipe for this purpose from a foundry in the State of California, and desired to have the same delivered by common carriers on its right of way in Mississippi. To effectuate this purpose, it made arrangements with a railroad company to deliver the pipe from the foundry to certain depots, or railheads, in the State of Mississippi, as near to its right of way as was feasible. It also engaged Dunn Bros., Inc., a Texas corporation, holding a certificate of public convenience and necessity for interstate and foreign commerce from the Interstate Commerce Commission, but without such certificate from the Mississippi Public Service Commission for intrastate commerce in the State of Mississippi, to deliver the pipe, by motor truck, from the depots or railheads in Mississippi to its right of way and string the same along the said right of way. The Transmission Company, as consignor, shipped the pipe by railroad to itself as consignee to the several depots or railheads in Mississippi. Bills of lading were issued accordingly. The delivering railroad did not, of course, parallel the Transmission Company's right of way. The Transmission Company paid freight thereon; and when a shipment arrived at its rail destination, one of the Transmission Company's agents inspected and accepted the same. Dunn Brothers then took charge of the shipment, and after giving a receipt to the railroad company for and on behalf of the Transmission Company as both consignor and consignee, unloaded the car and delivered the pipe along the right of way, for which service the Transmission Company paid them. In the agreed statement of facts, Dunn Brothers said that the purpose of the inspection by an agent of the transmission Company was to determine whether there had been any damage to the shipment in transit by the railroad company. This hauling was done between March and May 1951. Dunn Brothers had no property in the state except its equipment; and as soon as the job was completed, it moved the equipment out of the state.

The question is whether or not this transportation was interstate or intrastate; and in either event, whether or not it was subject to the tax in question.

The Federal cases on this question are legion. There are also a number of our own cases.

In the recent case of Coleman, Attorney General v. Trunkline Gas Company, 218 Miss. 285, 63 So.2d 73, in recognition of the Federal rule, this Court held that a privilege tax which was imposed upon a pipe line operator, whose operations were wholly and exclusively in interstate commerce, was violative of the commerce clause of the Federal Constitution, and fell ouside of field of legitimate state taxation. This decision involved a construction of Section 34, Chapter 138, Laws of 1944, as amended by Chapter 410, Laws of 1952, which undertook to levy a privilege on a mileage basis on account of the state's protection. The record disclosed, however, that the gas company paid a franchise tax, an income tax, and an ad valorem tax, and the Court held that, in so doing, it was already entitled to the state's protection.

The Federal courts have repeatedly held that state taxes cannot be collected upon the privilege of carrying on a business that is exclusively interstate in character. Spector Motor Service v. O'Connor, 340 U.S. 602, 71 S.Ct. 508, 95 L.Ed. 573; Alpha Portland Cement Co. v. Massachusetts, 268 U.S. 203, 45 S.Ct. 477, 69 L.Ed. 916; Ozark Pipe Line Corp. v. Monier, 266 U.S. 555, 45 S.Ct. 184, 69 L.Ed. 439.

It was pointed out in the opinion in the Spector Motor Service case, supra [340 U.S. 602, 71 S.Ct. 511], that 'The objection to its validity does not rest on a claim that it places an unduly heavy burden on interstate commerce in return for protection given by the State. The tax is not levied as compensation for the use of highways or collected in lieu of an ad valorem property tax. Those bases of taxation have been disclaimed by the highest court of the taxing State. It is not a fee for an inspection or a tax on sales or use. It is a 'tax or excise' placed unequivocally upon the corporation's franchise for the privilege of carrying on exclusively interstate transportation in the State.'

In Interstate Oil Pipe Line Company v. Stone, 203 Miss. 715, 35 So.2d 73, 78, 36 So.2d 142, which had under consideration Sections 10105 and 10109, Code of 1942, Annotated, though a different paragraph of Section 10109, supra, it was held that the tax there involved was on income derived from the transportation of oil by the pipe line from wells to shipping points and for pumping the oil into tank cars for shipment by rail out of the state. The opinion quoted from 11 Am.Jur., Commerce, Section 28, p. 29, as follows: "It is not within the power of the parties by the form of their contract to convert what is exclusively a local business., subject to state control, into an interstate business, protected by the commerce clause." The quotation from the text was documented by Federal Compress & Warehouse Co. v. McLean, 291 U.S. 17, 54 S.Ct. 267, 78 L.Ed. 622; Superior Oil Co. v. Mississippi, 280 U.S. 390, 50 S.Ct. 169, 74 L.Ed. 504; Browning v. Way-cross, 233 U.S. 16, 34 S.Ct. 578, 58 L.Ed. 828. The opinion also cited 15 C.J.S., Commerce, Secs. 18-25, pp. 278-291, to the same effect. The Court observed that 'the oil was not committed by the owner to this pipe line company for transportation to another state, but to be transported to the railroad and there loaded into tank cars.' The opinion then cited Coe v. Errol, 116 U.S. 517, 6 S.Ct. 475, 479, 29 L.Ed. 715, to show that the carrying of articles in carts or other vehicles to the depot, where the journey is to commence, is no part of the journey; and likewise the carrying of articles from the farm or forest to the depot is only an interior movement.

On the Pipe Line's appeal the Supreme Court of the United States affirmed. Interstate Oil Pipe Line v. Stone, 337 U.S. 662, 69 S.Ct. 1264, 1266, 93 L.Ed. 1613.

Four of the Justices in an opinion written by Justice Rutledge said: 'We do not pause to consider whether the business of operating the intrastate pipe lines is interstate commerce for, even if we assume that it is, Mississippi has power to impose the tax involved in this case. Further, we do not find it necessary to dispute that the Supreme Court of Mississippi construed the statute as imposing a tax on the privilege of operating a pipe line wholly within the state, and not a tax solely upon the 'local activities of 'maintaining, keeping in repair, and otherwise in manning the facilities" situated in Mississippi, Memphis Natural Gas Co. v. Stone, 335 U.S. 80, 92-93, 68 S.Ct. 1475, 1481, 92 L.Ed. 1832 [1842, 1843], or upon the gross receipts themselves, Central Greyhound Lines v. Mealey, 334 U.S. 653, 68 S.Ct. 1260, 92 L.Ed. 1633. While we are of course bound by the construction given a state statute by the highest court of the State, we are concerned with the practical operation of challenged state tax statutes, not with their descriptive labels.' The opinion also said: 'Since all the activities upon which the tax is imposed are carried on in Mississippi, there is no due process objection to the tax. The tax does not discriminate against interstate commerce in favor of competing intrastate commerce of like character. The nature of the subject of taxation makes apportionment unnecessary; there is no attempt to tax interstate activity carried on...