Stone v. General Contract Purchase Corporation

• Decision Date: 27 April 1942
• Docket Number: 34958.
• Citation: 193 Miss. 301,7 So.2d 806
• Court: Mississippi Supreme Court
• Parties: STONE, Chairman of State Tax Commission, v. GENERAL CONTRACT PURCHASE CORPORATION.

7 So.2d 806

193 Miss. 301

STONE, Chairman of State Tax Commission, v. GENERAL CONTRACT PURCHASE CORPORATION.

No. 34958.

Supreme Court of Mississippi

April 27, 1942

Harold Cox, of Jackson, for appellant.

J H. Sumrall, of Jackson, Geo. H. Ethridge, Asst. Atty. Gen and R. W. Heidelberg, of Hattiesburg, for appellee.

SMITH Chief Justice.

The General Contract Purchase Corporation, a Missouri corporation, is engaged in financing retail dealers of automobiles. This, it does under agreements so to do with the retail dealers, by paying manufacturers or distributors of automobiles purchased by the retail dealer and taking his notes therefor together with a contract that the title to the automobiles shall vest and remain in the appellee until the dealer repays the money advanced him by the appellee for their purchase; and when the dealer sells an automobile taking the purchaser's note or notes therefor under a contract reserving the title thereto in the dealer until the note or notes are paid, the appellee purchases these notes from the dealer and thereafter collects the payments due thereon. It maintains an office or place of business at Jackson, Mississippi, and another at Memphis, Tennessee; its officers and employees at the one place having no supervision or control over its officers and employees at the other. Both offices acquire these promissory notes given to and by retail dealers in automobiles in Mississippi, where the automobiles are and remain. The appellee's agreement with these dealers does not obligate it to purchase all of the notes taken by them for automobiles sold but only such as it approves. The notes, with their accompanying retain-title contracts acquired by the appellee's Memphis office, are delivered to it by the dealer in person, by agent, or through the U. S. Mail. Those purchased by its Jackson office are so delivered to it there. The Memphis office, when necessary, sends its agents into Mississippi to collect from the makers of these notes the payments due thereon; to ascertain the continued existence and condition of the automobiles securing these payments, and to enforce the liens thereon when necessary.

Chapter 110, Laws of 1940, levies "an annual state-wide privilege tax upon every person, firm, corporation, or association * * * doing a business of purchasing discounting, or otherwise acquiring notes, trust receipts, or other forms of indebtedness secured by liens, in the form of mortgages, retain-title or purchase contracts, or other liens, upon motor vehicles, furniture, refrigerators, * * * the amount of said tax to bear a direct relationship to the value of the securities held, owned, or acquired by such person, firm, corporation or association, and exacted in return for the protection afforded by the government and laws of this state in the enjoyment of such ownership and rights acquired thereby; the tax to be computed by application of the rate hereinafter set out to the total value of such securities." § 1.

When the appellant, who is charged with the duty of collecting the tax, called on the appellee for the payment of the tax due by it, he included in the measure thereof the value of the securities acquired by the appellee at its Memphis office. The appellee paid the tax, and filed two suits in the court below enjoining the appellant from paying the tax into the state treasury and seeking to recover it from him. One of these suits deals only with the securities acquired at the appellee's Memphis office and the other with those acquired at its Jackson office. These suits were consolidated and tried together in the court below, resulting in a decree dismissing the appellee's bill dealing with its Jackson, Mississippi, securities and awarding it the relief prayed for in the bill dealing with its Memphis, Tennessee, securities. Both sides appeal.

We are to decide:

1. Whether this tax is a privilege tax or one on property, it being admitted that if it is on property it runs counter to Section 112 of the State's Constitution.

2. If it is a privilege tax does the statute violate the due process and equality provisions of the Fourteenth Amendment to the Federal Constitution, because of its provisions exempting banks, persons engaged in a general mercantile business, and dealers engaged in selling the kind of property described in the statute; from the payment of the tax; forbidding the taxpayer to "pass the tax imposed by this act on to the consumer or dealer", and forbidding persons liable for the tax and failing to pay it from access to the State's courts for the collection of the notes or the enforcement of the liens securing them.

3. Whether the statute applies to persons and corporations who, at a place of business in another state, acquire securities of the character described in the statute, but whose agents come into this state, collect the payments due on these notes, ascertain the existence and condition of the property securing the payments and when necessary take possession of the property in order to enforce the lien thereon.

(a) "The distinction between a property tax and a license or privilege tax imposed for revenue is that the function of the property tax is to raise revenue by virtue of the fact that the property is within the jurisdiction of the taxing power, and no condition or restriction is imposed thereby upon the use of the property taxed, while the license or privilege tax, even though also passed to raise revenue, is imposed upon the right to exercise a privilege, and its payment is made a condition to the exercise, or continuance in the exercise of the privilege, business, or vocation involved. * * * If in its nature a tax is a license or privilege tax, it does not become a property tax simply because it is proportioned in amount to the value of the property used in connection with the privilege which is enacted." 33 Am.Jur., "Licenses", section 3; State v. Lawrence, 108 Miss. 291, 66 So. 745, Ann.Cas.1917E, 322; Southern Package Corp. v. State Tax Commission, 174 Miss. 212, 164 So. 45 Tested by this rule, it will be readily seen that this tax is a privilege and not a property tax. In Thompson v. Kreutzer, 112 Miss. 165, 72 So. 891, and Barnes v. Jones, 139 Miss. 675, 103 So. 773, 43 A.L.R. 673, invoked by the appellee, the tax on the ownership of property, without reference to any activity in connection with it. In Thompson v. McLeod, 112 Miss. 383, 73 So. 193, L.R.A.1918C, 893, Ann.Cas.1918A, 674, a border-line case, the activity taxed (extracting turpentine from trees grown on land) was one of the rights inherent in the ownership of the land, and therefore the tax was held to be, in effect, a tax on the land itself. If it be said that that case departed from the rule above announced, we must decline to build on it, and will confine it to its own facts.

(b) It will not be necessary for us to here determine the constitutional validity of any of the provisions of this statute set forth under paragraph numbered 2 hereof, for if they should be held to be invalid, that fact would not render the statute void, but it would be enforced as if these provisions had not appeared therein, both under the general rule therefor, and Section 12 of this statute, which expressly so declares.

(c) This brings us to the third of these questions. The appellee's contention in this connection is that promissory notes acquired by its Memphis office can not be taken into consideration in computing the tax due by it for the reason that as to those notes it did no business in Mississippi. Acquiring these notes was one of the things necessary to be done in the prosecution of the appellee's business, but it was not the only one, for they must either be sold or collected, and when necessary the liens securing their payment must be enforced. All of the things necessary for the prosecution of a business need not take place within the state imposing a privilege tax...