Tintic Standard Mining Co. v. Utah County

• Decision Date: 22 October 1932
• Docket Number: 5214
• Court: Utah Supreme Court
• Parties: TINTIC STANDARD MINING CO. v. UTAH COUNTY et al

15 P.2d 633

80 Utah 491

TINTIC STANDARD MINING CO. v. UTAH COUNTY et al

No. 5214

Supreme Court of Utah

October 22, 1932

Appeal from District Court, Fourth District, Utah County; Geo. W Worthen, Judge.

Action by the Tintic Standard Mining Company against Utah County and others. From a judgment of dismissal, plaintiff appeals.

REVERSED AND REMANDED, WITH DIRECTIONS.

Dan B Shields and Vernon Snyder, both of Salt Lake City, for appellant.

Geo. P Parker, Attorney General, and A. L. Booth, Geo. S. Ballif, and I. E. Brockbank, all of Provo, for respondents.

FOLLAND, J. CHERRY, C. J., and STRAUP, ELIAS HANSEN, and EPHRAIM HANSON, JJ., concur.

OPINION

FOLLAND, J.

This action was brought by plaintiff to recover a portion of its 1925 tax on the net proceeds of its mine paid under protest to the county treasurer of Utah county. After a hearing, the court sustained a motion for nonsuit and entered judgment of dismissal of the cause. From this judgment plaintiff appeals.

The basis of appellant's complaint is that certain expenditures made by it in 1925, and which it insists it was entitled lawfully to have deducted from its gross proceeds in computing the net annual proceeds of the mine, were not allowed by the board of equalization. These items are the salaries paid to its general manager, who was also president, treasurer, and director of the corporation, and assistant general manager, who was also a director, in the total sum of $ 39,000, and money paid by it for the purchase of two mine shafts and other underground workings in the mining ground of the Iron Blossom Mining Company amounting to $ 206,294.01.

The deduction of the amount paid as salaries of the general manager and assistant manager was refused by the state board of equalization because of the provisions of the statute. Comp. Laws Utah 1917, § 5864, as amended by Laws Utah 1919, c. 114, p. 319, defines the phrase "net annual proceeds" as follows:

"The words 'net annual proceeds' of a metalliferous mine or mining claim as used in this Section are defined to be the net proceeds realized during the preceding calendar year from the sale, or conversion into money, or its equivalent, of all ores from such mine or mining claim extracted by the owner or lessee, contractor or other person working upon or operating the property, during or previous to the year for which the assessment is made, including all dumps and tailing, after making the following and no other deductions from the gross proceeds thereof:

"(a) The amount of money actually expended during the year for labor, tools, appliances, and supplies used in the mining operations, including the labor of the lessee and his employees and the amount expended by the lessee for tools, appliances, and supplies, used by him in his mining operation; provided, that the personal labor of lessees shall be computed at the prevailing wage.

"( b) The actual and necessary office and clerical expenses and salaries of employees, other than corporate officers, within the State.

"(c) The actual cost of the installation, construction, maintenance, and repair of machinery and improvements made during the year in and about the workings of the mine for use in extracting the ores.

"(d) The actual cost of reduction works and mills, and improvements thereof, constructed during the year and operated in connection with the mine.

"(e) The actual cost of the transportation of the ore from the mine to the market or reduction works.

"(f) The actual cost of sampling, assaying, reducing and smelting the ore and extracting the metals and minerals therefrom.

"(g) The amount paid for State and local taxes during the year.

"(h) The amount paid for compensation insurance, or in lieu of such compensation insurance, for compensation of injured employees and the compensation paid to dependents of killed employees, required to be paid under the workmen's compensation laws of Utah.

"Money expended during any year except the calendar year for which the deduction is made shall not be included in the deductions to be made in arriving at net proceeds. The salaries, or any portion thereof, of corporate officers shall not be included as a deduction in arriving at the 'net proceeds' herein defined."

Comp. Laws Utah 1917, § 5929, as amended by Laws Utah 1919, c. 114, requires a statement to be filed with the state board of equalization by the person, corporation, or association engaged in mining, showing the gross yield of the mine, and, after making certain deductions, the resulting net proceeds. Comp. Laws Utah 1917, § 3931, as amended by Laws of Utah 1919, c. 114, specifies what must be allowed in the statement as deductions for expenditures, and provides, so far as applicable to the present litigation, as follows:

"For necessary clerical and office expenses and salaries of employees. * * * Such expenditure shall not include the salaries, or any portion thereof, of any corporate officer of the mining company, nor of any officer or employee not residing in the State."

These statutes are claimed by appellant to be unconstitutional and void as in conflict with the provisions of section 4, article 13, of the Constiution of this state as amended in November of 1918.

Prior to the adoption of the Constitution in 1896, no provision was made for the taxing of the net proceeds of a mine. Section 4, article 13, of the Constitution as originally adopted, is as follows:

"All mines and mining claims, both placer and rock in place, containing or bearing gold, silver, copper, lead, coal, or other valuable mineral deposits, after purchase thereof from the United States, shall be taxed at the price paid the United States therefor, unless the surface ground, or some part thereof, of such mine or claim is used for other than mining purposes, and has a separate and independent value for such other purposes; in which case said surface ground, or any part thereof, so used for other than mining purposes shall be taxed at its value for such other purposes, as provided by law; and all the machinery used in mining, and all property and surface improvements upon or appurtenant to mines and mining claims, which have a value separate and independent of such mines or mining claims, and the net annual proceeds of all mines and mining claims, shall be taxed as provided by law."

This section was amended in 1908 by changing the last phrase "shall be taxed as provided by law" so as to read "shall be taxed by the state board of equalization." This section was again amended in November of 1918, the provisions of which were in force at the time this litigation arose. The amendment adopted at that time is as follows:

" All metalliferous mines or mining claims, both placer and rock in place shall be assessed at $ 5.00 per acre, and in addition thereto at a value based on some multiple or sub-multiple of the net annual proceeds thereof. All other mines or mining claims and other valuable mineral deposits, including lands containing coal or hydrocarbons, shall be assessed at their full value. All machinery used in mining and all property or surface improvements upon or appurtenant to mines or mining claims, and the value of any surface use made of mining claims, or mining property for other than mining purposes, shall be assessed at full value. The state board of equalization shall assess and tax all property herein enumerated, provided that the assessment of $ 5.00 per acre and the assessment of the value of any use other than for mining purposes shall be made as provided by law."

Section 4 of article 13 was again amended in 1932, but that amendment has no bearing on the question before us. The state Legislature at its first session after the adoption of the Constitution enacted provisions for the assessment of the net annual proceeds of all mines and mining claims to be taxed as other personal property, and specified the deductions which should be allowed in the ascertainment of net annual proceeds. These provisions of the statute so far as applicable are as follows:

" Sec. 63. The statement mentioned in the preceding section must contain a true and correct account of the actual expenditures of money and labor in and about extracting the ore or mineral from the mine and transporting the same to the mill or reduction works, and the reduction of the ore and the conversion of the same into money, or its equivalent, during the year.

" Sec. 64. In making the statement of the expenditures mentioned in the preceding section there must be allowed all moneys expended for necessary labor, machinery and supplies needed and used in the mining operations for improvements necessary in and about the workings of the mine for reducing the ore, for the construction of mills and reduction works used and operated in connection with the mine, for transporting the ore and for extracting the metals and minerals therefrom; but the money invested in the mines or improvements during any year except the year immediately preceding such statement must not be included therein. Such expenditures do not include the salaries or any portion thereof of any person or officers not actually engaged in the working of the mine, or personally superintending the management thereof." Laws Utah 1896, sections 63 and 64, p. 442.

A case involving the construction and application of the constitutional provision and the statutes enacted in pursuance thereof came to the Supreme Court in 1898, in Mercur Gold Mining & Milling Co. v. Spry 16 Utah 222, 52 P. 382, 384. It was there decided that the provision of the Constitution with respect to the assessment of the net proceeds of mines was not self-enacting, but required legislation to make it effective, and that no tax could be collected on the net...