Superior Bath House Co v. Carroll, No. 180

• Court: United States Supreme Court
• Writing for the Court: BLACK
• Citation: 85 L.Ed. 721,61 S.Ct. 503,312 U.S. 176
• Parties: SUPERIOR BATH HOUSE CO. v. McCARROLL, Com'r of Revenues for State of Arkansas
• Docket Number: No. 180
• Decision Date: 03 February 1941

312 U.S. 176 61 S.Ct. 503 85 L.Ed. 721 SUPERIOR BATH HOUSE CO.

v.

McCARROLL, Com'r of Revenues for State of Arkansas.

No. 180. Submitted Dec. 18, 1940. Decided Feb. 3, 1941.

Mr. Terrell Marshall, of Little Rock, Ark., for appellant.

Messrs. Frank Pace, Jr., and Lester M. Ponder, both of Little Rock, Ark., for appellee.

Mr. Justice BLACK delivered the opinion of the Court.

By a 1929 Act, Arkansas imposed a tax of 2% on the net income of domestic corporations 'with respect to

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carrying on or doing business' in the state.¹ Appellant, a corporation organized under Arkansas law, leases from the United States and operates for profit a bath house on the federal reservation at Hot Springs. Whether appellant is subject to the state tax depends on the interpretation of the language of a provision of a Congressional Act of 1891 and the corresponding provision of an Arkansas Act of 1903. The Congressional Act reads: 'The consent of the United States is hereby given for the taxation, under the authority of the laws of the State of Arkansas applicable to the equal taxation of personal property in that State, as personal property of all structures and other property in private ownership on the Hot Springs (National Park) Reservation.'² The 1903 Arkansas act ceded to the United States exclusive jurisdiction over the business area of the reservation, reserving only the right to tax accorded by the 1891 Act and the right to serve criminal and civil process.³ The Supreme Court of Arkansas held appellant liable for the tax,⁴ and the case is here on appeal, as authorized by 28 U.S.C. § 344, 28 U.S.C.A. § 344.

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Arkansas does not contend, nor did the Supreme Court of that state hold, that appellant was liable for the state income tax under the general power of the state to tax corporations created pursuant to Arkansas law. On the contrary Arkansas admits that under the reciprocal state and federal acts the United States possesses complete sovereign power over the Hot Springs Reservation, subject to the right of the State of Arkansas to tax in accordance with the 1891 Act and subject to its right to execute within the reservation its civil and criminal process. The state does not claim a right of any kind to tax any corporation or individual doing business on the reservation unless the tax comes within the scope of its agreement with the government, effectuated by the 1891 and 1903 federal and state legislation. Since the state has taken this view, and since it is our opinion that the tax can be sustained on this basis, it is unnecessary for us to determine whether any other basis might conceivably exist.

While not controlling here, it has been the consistent conviction of the Arkansas court that the federal legislation conferred broad powers of taxation upon the state. In Ex parte Gaines, 56 Ark. 227, 19 S.W. 602, decided one year after the original 1891 Act, the court held that a leasehold interest on the reservation was subject to state taxation. In Buckstaff Bath House Co. v. McKinley, 198 Ark. 91, 127 S.W.2d 802, 805,⁵ the court upheld the state unemployment compensation tax, saying of the 1891 Act: 'The Congress seemingly intended (and this construction is strengthened by the Gaines case) to permit

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the State to exercise its sovereignty within the Reservation with respect to the conduct of business, commerce, and the professions, subject only to the interest retained by the Government and the right to enforce restrictions under the Federal laws * * *.'

Appellant, however, reads the Act more narrowly than does the Arkansas court, and contends that the only taxes Arkansas can levy are ad valorem taxes imposed directly on tangible property. But the words tangible and ad valorem appear nowhere in the Act, nor do any synonymous words there appear. And in our opinion to construe the Act as though such words had been used would do violence to the intent of Congress. The language of Congress was peculiarly adapted to the broadening of the state's taxing power not to its restriction. Thus, though under Arkansas law structures attached to land were considered a part of the realty, taxable or non-taxable with the land,⁶ Congress provided that privately owned structures on the tax exempt land of the reservation should be taxed 'as personal property.' Not only was this done, but also all 'other property in private ownership' was expressly made subject to state taxation. By these provisions Congress manifested its purpose that no type of privately owned property should escape the state's taxing power merely because it was owned or used on the reservation.

And appellant's insistence that these provisions permit only ad valorem taxation loses sight of the fact that the word property is by no means limited, in all its variations,

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to actual tangible physical things.⁷ Its meaning must be determined from its context as illumined by the subject treated and the objectives sought. It is true that Arkansas had no corporate income tax in 1891, when the original permission to tax was granted. But...