Stone v. Martin Veneer Corp.

• Decision Date: 07 November 1938
• Docket Number: 33381
• Citation: 183 Miss. 712,184 So. 435
• Court: Mississippi Supreme Court
• Parties: STONE v. MARTIN VENEER CORPORATION

184 So. 435

183 Miss. 712

STONE v. MARTIN VENEER CORPORATION

No. 33381

Supreme Court of Mississippi, Division B

November 7, 1938

Suggestion Of Error Overruled November 21, 1938.

(Division B.)

1 LICENSES.

A manufacturer of wooden veneer and wooden plugs was not required, under statute imposing a sales tax for the privilege of engaging in business on persons engaged principally in the business of producing timber for sale, to pay sales tax on proceeds, constituting less than 10 per cent, of its operations, from logs which manufacturer sold to another firm because the logs were unsuited to manufacturer's purposes, since sale of logs was a mere incident of the principal business (Laws 1936, ch. 158, sec 2).

ON SUGGESTION OP ERROR.

2. APPEAL AND ERROR.

The Supreme Court was not required to pass on constitutional objections to sales tax, urged for the first time in the Supreme Court on suggestion of error, and not raised by the pleadings.

Suggestion Of Error Overruled November 21, 1938.

APPEAL from the circuit court of Jackson county, HON.W. A. WHITE, Judge.

Action by the Martin Veneer Corporation against A. H. Stone, Chairman of the State Tax Commission, in his official capacity as Sales Tax Commissioner of the state, to recover the amount of sales taxes paid under protest. Judgment for plaintiff, and defendant appeals. Affirmed.

Affirmed. Suggestion of error overruled.

J. A. Lauderdale, Assistant Attorney-General, for appellant.

It is clear that Section 2 and Section 2-a of Chapter 119, Laws of 1934, as amended by Chapter 158, Laws of 1936, levy the tax on the business of appellee and that it is liable for same unless it is exempted by the proviso in Section 2-a.

Jackson Fertilizer Co. v. Stone, 173 Miss. 183, 162 So. 170.

Under the facts alleged in the declaration, appellee's principal and only business is felling and producing timber for sale, profit or commercial use.

J. H. Sumrall, of Jackson, for appellant.

Primary business of appellee is production of timber for commercial purposes.

Section 2-a, Chapter 119, Laws of 1934.

The contention of the appellant is that, being the owner of a large tract of timber land, from which timber is produced for the purposes of manufacture and sale, would make of said appellee a person primarily and principally engaged in the production of timber, as contemplated by said Section 2-a.

It is a cardinal rule in the construction of statutes that an exception is strictly construed. An exception, being in the nature of an exemption from the general provision of a statute which the proviso modifies, is regarded as an exemption in the sense that the language of a proviso must be as strictly construed as the language of an exemption statute.

Lewis' Sutherland Statutory Construction, sec. 352.

There can be no question of the fact that the appellee was engaged in the business of producing timber, such business being taxable under Section 2-a of the Sales Tax Law.

The use of a part of the timber produced in the manufacturing process, would not exempt the balance of the timber so produced from the tax imposed by Section 2-a.

Lewis' Sutherland Statutory Construction, sec. 347.

The provision of the statute, "only persons engaged principally in the business of felling and producing timber for sale, " etc., ". . . shall be required to pay the tax levied in this section, " does not exempt such operations as the appellee was engaged in from the tax.

Lewis' Sutherland Statutory Construction, sec. 363; Roseberry v. Norsworthy, 135 Miss. 845; Rawlings v. Ladner, 165 So. 427, 174 Miss. 611; Zeigler v. Zeigler, 164 So. 768, 174 Miss. 302; Walters v. Walters, 177 So. 507; Craig v. Mississippi Power & Light Co., 180 So. 604.

Ford & Ford, of Pascagoula, for appellee.

It is our contention, first, that the appellee in this cause does not come within the provisions of the tax imposed by Section 2-a of Chapter 119 of the Laws of 1934, in that its principal business is the manufacture and sale of veneer and plugs and not of buying, logging and selling timber, etc., for commercial purposes.

Second, even though the word "principally" was stricken out of the act, the appellee would not be liable for the tax, because it is plainly violative of both the State and Federal Constitutions, in that the tax is only levied on those who do not either manufacture the logs themselves in this state, or those who do not sell their logs to a concern which manufactures them in this state, the tax being levied only on those selling or delivering logs to persons outside of the state, or transporting them out of the state for utilization there.

It is the contention of counsel for appellant that the principal business of the appellee is the production of timber for sale, profit, or commercial use, etc. It is our contention that the production and sale of timber by it is not its principal business, but that, as alleged in the declaration, the principal business is the manufacture and sale of veneer and wooden plugs.

It is uniformly held that the performance of an isolated or incidental transaction does not constitute doing business.

Item Co., Ltd. v. Shipp, 140 Miss. 699, 106 So. 437.

As the court will observe Section 2-a of Chapter 119 of the Laws of 1934 does not attempt to grant an exemption to persons not principally engaged in the business, but on the contrary the tax is levied only on those who are principally engaged in the particular business. The burden is therefore on the State to show that the taxpayer is engaged in that business, under the rulings of this court announced in the cases of Pan American Petroleum Co. v. Miller, 154 Miss. 565, and State v. Mississippi Power & Light Co., 161 Miss. 839.

The court in these cases reannounces and follows the fundamental rule that wherever there is any doubt as to whether or not the tax should apply to a particular person, that the doubt is resolved in favor of the taxpayer and against the sovereign.

Our second contention in this case is that regardless of the construction placed on the word "principal" as used in Section 2-a of Chapter 119 of the Laws of 1934, and even though this word were not in the statute, that the said Section 2-a is violative of the Constitution of the State of Mississippi, as well as that of the United States of America, for the reason that it seeks to exempt from taxation the gross proceeds of sale or value of logs or timber which is manufactured in this state by the producer, or is sold to be manufactured in this state and only levies the tax on the gross proceeds of logs and timber which are sold for delivery outside of the state, or are transported out of the state.

Art. 1, sec. 8, par. 3, U.S. Constitution; Sec. 14, Constitution of Mississippi; Adams v. Mississippi Lbr. Co., 84 Miss. 23.

In the case of Lowery v. City of Clarksdale, 154 Miss. 155, the court announced the rule, that a classification for purposes of taxation must rest on some reasonable distinction, citing Scleisenger v. Wisconsin, 70 L.Ed. 557. This court in the above cited case of Adams v. Mississippi Lbr. Co., stated and held that there can be no valid classification between timber for home sale and timber for export.

It is further manifest that the act as written constituted a discrimination against gross receipts from sales of property made in interstate commerce. This is prohibited by the interstate commerce clause of the Constitution, as held by the Supreme Court of the United States in the case of Pullman Co. v. Richardson, 67 L.Ed. 682, and New Jersey Bell Telephone Co. v. State Board of Taxes and Assessments, 74 L.Ed. 463, which doctrines were reannounced in the case of East Ohio Gas Co. v. Tax Commission, 75 L.Ed. 1171.

Sprout v. South Bend, 72 L.Ed. 833; Thompson v. McLeod, 112 Miss. 383; Thompson v. Kreutzer, 112 Miss. 165.

Argued orally by J. A. Lauderdale and J. H. Sumrall, for appellant, and by J. I. Ford, for appellee.

STATEMENT OF CASE.

Appellee, a foreign corporation authorized to do business in this state, brought this action in the Circuit Court of Jackson County against A. H. Stone, Chairman of the State Tax Commission, in his official capacity of Sales Tax Commissioner of the state, to recover the sum of $ 734.79 representing sales taxes paid by appellee to the State Tax Commission for the two-year period beginning the 1st of January, 1936, and ending December 31, 1937, which had been paid under protest. Appellee demurred to the declaration, which demurrer was overruled, and appellee, declining to plead further, final judgment was entered for the amount sued for. From that judgment, appellant prosecutes this appeal.

The case is clearly and succinctly stated in the declaration and the demurrer which, leaving off formal parts, follow:

"Declaration Comes the plaintiff herein, Martin Veneer Corporation, and respectfully avers that it is a corporation, chartered, created and organized under the laws of the State of Delaware; that it has qualified to do business in the State of Mississippi as required by law and has its principal place of business in the City of Pascagoula, Jackson County, Mississippi. That the defendant herein, A. H. Stone, is the official Sales Tax Commissioner of the State of Mississippi, the said A. H. Stone being a member of the State Tax Commission of the said State and to whom has been allocated the position of Sales Tax Commissioner of the State of Mississippi by the said Commission, and, whose official place of residence as such Commissioner is the City of Jackson, Hinds County, Mississippi.

"Plaintiff avers that it is engaged in the business of manufacturing wooden veneer and wooden plugs and for said purpose it has a manufacturing plant located in the City of...