Tri-State Transit Co. of Louisiana v. Stone

Decision Date20 December 1943
Docket Number35459.
Citation196 Miss. 23,16 So.2d 35
CourtMississippi Supreme Court
PartiesTRI-STATE TRANSIT CO. OF LOUISIANA v. STONE, Chairman, State Tax Commission.

Suggestion of Error Sustained Feb. 14, 1944.

See 16 So.2d 782.

In Banc.

J Morgan Stevens and J. M. Stevens, Jr., both of Jackson, for appellant.

Greek L. Rice, Atty. Gen., and Jefferson Davis, Asst. Atty. Gen for appellee.

ALEXANDER Justice.

Appellant filed its petition to revise its income tax return for the year 1941 so as to claim deduction for excess profits taxes paid to the Federal Government during that period. The petition was denied by the Commissioner and upon appeal to the State Tax Commission the former ruling was upheld. This action was reaffirmed upon appeal to the Chancery Court. Sections 29, 30, Chapter 120, Laws of 1934. Our attention has been focused upon Section 8 of this Act which is as follows "In computing the net income there shall be allowed as deductions: (1) * * *. (2) * * *. (3) Taxes, other than income taxes imposed by any authority, paid or accrued within the taxable year." At the time the Act was passed, there was no excess profits tax in force.

In the order of the Commissioner denying the right to amend the return and allow the deduction, his action was sought to be justified by the holding that such taxes were "Taxes measured by income." Whether the use of this language was an instinctive recognition of a necessity to broaden the connotation of income taxes or was consciously adroit, we need not ponder. It is apparent that the decision, by its own construction, assumed a premise which, if sound, would furnish a staunch basis for its conclusions.

Had our statute in fact allowed as deductions all taxes except those "measured by income", it would have excluded by this phrase alone not only income taxes properly so called but also such excise taxes as estate taxes, gift taxes, sales taxes and all those privilege taxes which are so admeasured. Among the latter are those upon contractors, cotton compresses, ferries, insurance companies, railroads, certain public utilities, and tobacco. Had it excepted all "excise taxes", it would have been similarly broad, yet it is extremely doubtful if even such designation would have included "income taxes."

That a tax is computed upon income does not constitute it an income tax any more than the fact that an inheritance tax computed upon property makes of it a property tax. See Enochs v. State, 133 Miss. 107, 97 So. 534. Indeed the Legislature has appropriated the name "income tax" as designating a well understood excision from net income. They have preempted the phrase as a technical term and given it a popular connotation. It is differentiated from other forms of direct and excise taxes by its purpose and its permanence, by the occasion for its imposition, by its incidents and its incidence, and particularly by its name. It is not sufficient that an excess or war profits tax is likewise measured by income. It is not computed alone on the factor of the current year's income. It had a distinct purpose and occasion; its incidence is upon corporations alone; it is a war measure with a limited life expectancy. Income taxes, properly so called, have been enacted since the Civil War. Excess profits taxes were first imposed in 1917, and later repealed. The present enactment was made in 1942. It has a distinctive designation-one which is invariably used in federal statutes to distinguish it from what are known as income taxes. The federal statute does not confound them but lists its exceptions as income taxes, excess profits taxes, estate taxes, inheritance taxes, succession taxes and gift taxes. To the State's challenge that, "if an excess profits tax is not an income tax what is it?" counsel make the apt and laconic reply that it is an excess profits tax. While it is true that a corporation is never liable for an excess profits tax unless it is liable for an income tax, the reverse does not obtain. A return for income tax does not reveal liability for excess profits tax, nor will the filing of a return for the former set in motion the statute of limitation against liability for the latter. Beam v. Hamilton, 6 Cir., 289 F. 9; Rockland & Rockport Lime Corporation v. Ham, D.C., 38 F.2d 239; United States v. Updike, D.C., 1 F.2d 550.

In Curley v. Moore, 137 Misc. 312, 244 N.Y.S. 580, cited by appellee, a private agreement to apportion income taxes was held to have intended to include excess profits taxes. In addition to the circumstances that a private contract was being construed, the court called attention to the fact that at the time of the contract an excess profits tax was in force. The case is not helpful.

The excess profits tax has been designated as one imposed "in addition to other taxes." Chapman v. United States, 64 Ct. Cl. 247. It has been described as a "separate, distinct, and then novel source of revenue." Beam v. Hamilton, supra , wherein it was pointed out that a "distinction between ordinary income taxes and excess profits taxes was clearly recognized." In LaBelle Iron Works v. United States, 256 S.Ct. 377, 41 S.Ct. 528, 65 L.Ed. 998, they are referred to as "special taxation." This tax was in its essentials an emergency measure primarily to conscript for war purposes the excess profits of corporations engaged in supplying the tools of war. In no unreal sense, it fixes a ceiling upon unusual war profits. Let it be assumed that the proposal to limit individual income to $25,000 had become statutory. Could it be supposed that a taxpayer whose net salary was $50,000 would be liable for an income tax computed on the latter figure? After a cessation of hostilities, the excess profits tax will unquestionably by its terms and purpose be discontinued. But the income tax as a permanent source of governmental revenue will undoubtedly remain. Income taxes fall upon individuals, associations, partnerships, corporations, estates and trusts. If the earnings of corporations do not exceed a certain previously ascertained figure, they are not liable for an excess profits tax. They regularly pay a tax upon their income, while under the latter tax they in a rather literal sense pay the income.

It would seem as logical to identify all estate taxes with inheritance taxes. Indeed our statute does so, but by express terms. Yet even they are not necessarily identical. Turner v. Cole, 118 N.J.Eq. 497, 179 A. 113; 28 Am.Jur. p. 10. Nomenclature can not be ignored when terms have been given a technical meaning by popular usage.

Diversities of definition are apt to follow when the tax is analyzed solely by legalistic tests. For example, in Washington Mutual Savings Bank v. Chase, 157 Wash. 351, 290 P. 697, 71 A.L.R. 232, a tax "according to or measured by" the net income of corporations, although denominated by the statute a privilege tax, was held to be in effect an income tax. On the other hand, in Evans v. McCabe, 164 Tenn. 672, 52 S.W.2d 159, 617, a tax calculated upon a percentage basis of the income derived from stocks and bonds and designated in the statute as an income tax was held not to be an income tax. It should not be questioned that under our statute the tax in the former case, although construed as an income tax, would be an allowable deduction, while in the latter case the tax, although held not to be an income tax, would not be deductible. In both cases the courts in making detours around constitutional barriers collided with popular notions. As an example of restricted application, income from estates has been held not liable for an "income tax". Gavit v. Irwin, D.C., 275 F. 643, 648. Under the Act of Oct. 3, 1913, 38 St. L. 166, c. 16.

Nor may we risk violence to legislative intent by defining alike all terms which fall within general categories. Under the all inclusive word "taxes", there may be found the genus excise taxes under which there are several species, for example, privilege, income, estate and gift or social security taxes. Estate or inheritance taxes have been held to be taxes upon a privilege. Enochs v. State, 133 Miss. 107, 97 So. 534. Yet they are not mentioned in our privilege tax code. Legacies are gifts but an "estate tax" is not a "gift tax". All capitation taxes are poll taxes, yet a "poll tax", as is here generally understood and technically so referred to, means a particular form of tax for a special purpose. Used loosely, a municipal street tax is a poll tax. Indeed, in City of Faribault v. Misener, 20 Minn. 396, a commutable highway or road tax is so designated. Yet, in our local glossary of terms, the two have achieved a distinct import.

The two forms of taxation here involved are set forth in separate chapters, always separately referred to and are administered separately, each pursuant to distinct regulations. By Section 227 of the Act of October 21, 1942, 26 U.S.C.A. Int.Rev. Code, § 734, Section 734 of the Internal Revenue Code, as amended, was amended so as, for certain purposes, to include within the definition of "income taxes" all excess profit taxes. (See 56 Statutes at Large, p. 921). This amendment first appeared in the Act of March 7, 1941, § 11, 55 Stat. 27. While such a provision, if included in our statute, would have settled the matter, it was not done, and it is significant that this declaration was deemed necessary by the Congress for its particular purposes. Nor may this recognized necessity inure to the appellee's advantage since this provision was not only enacted long after our statute but also in positive recognition of its non-inclusion in the absence of such arbitrary enactment.

However, the point need not be belabored. The foregoing discussion has been extended merely to indicate typical bases of differentiation which have...

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