Union Naval Stores Co. v. Adams

• Decision Date: 31 March 1913
• Docket Number: 15,726
• Citation: 104 Miss. 299,61 So. 419
• Court: Mississippi Supreme Court
• Parties: UNION NAVAL STORES CO. v. WIRT ADAMS, STATE REVENUE AGENT

61 So. 419

104 Miss. 299

UNION NAVAL STORES CO. v. WIRT ADAMS, STATE REVENUE AGENT

No. 15,726

Supreme Court of Mississippi

March 31, 1913

APPEAL from the circuit court of Harrison county, HON. GEO. S DODDS, Special Judge.

Suit by Wirt Adams, state revenue agent, against the Union Naval Stores Company. From a judgment for plaintiff, defendant appeals.

The facts are fully stated in the opinion of the court.

Affirmed.

Ford White & Ford, W. J. Gex and R. W. Stoutz, for appellant.

Doubtless the attempt will be made to sustain the assessment under section 4266 of the Mississippi Code, which reads as follows:

"Sec 4266. Assessment of Money Loaned, etc. Every person, resident or nonresident, whether corporate or otherwise, and the agent of such nonresidents, having money loaned at interest in this state, or employed in the purchase or discount of bonds notes, bills, checks or other securities for money, or employed in any kind of trade or business, shall be taxed for the same in the county in which such person may reside or have a place of business, or be temporarily located at the time of the assessment; and if any such person fail or refuse to give in such money or money employed in any kind of trade or business, shall be taxed for the same in the county in which such person may reside or have a place of business, or be temporarily located at the time of the assessment; and if any such person fail or refuse to give in such money on oath, or if the assessor have cause to believe that such person has not rendered a true account of all such money, he shall assess to the person such amount as he shall have reason to believe correct, according to the best information he can procure; and he shall forward to the party or his agent, in writing, a notification of the assessment having been made. And the assessor is authorized to address written interrogatories to any agent or any nonresident, or to any other such person, for the purpose of obtaining such information, and to require written answers thereof on oath, which oath the assessor is authorized to administer; and if any person being so interrogated, shall refuse to answer the interrogatories on oath within a reasonable time, he shall be liable to pay the sum of five hundred dollars, to be recovered by action in the name of the county, for the use of the county; and it shall be the duty of the assessor to cause such suit to be brought."

Under this same section this court held nonresident mortgages not locally taxable. The opinion is very long, and briefs set out in full--briefs of very great ability. Adams v. Mfg. Co., 82 Miss 263, 34 So. 484.

The opinion of former Chief Justice GEORGE, 34 So. 524, quoting from the United States Supreme Court, goes to the foundation of the question by saying:

"'The power of taxation, however vast in its character and searching in its extent, is necessarily limited to subjects within the jurisdiction of the state. These subjects are persons, property and business."

This is not a personal, per capita or head tax, nor is it a tax on business or franchise. If anything, it is a property tax only, and must be tested that way.

This is clearly not a franchise tax, for no franchises are being exercised in this state; and the franchise to be a corporation was not conferred by this state, and cannot be taxed herein. Authorities supra.

And the statute includes residents and nonresidents, corporations and individuals, so that no franchise was in contemplation. Nor is it an occupation tax, because occupations are elsewhere taxed by license taxes. This statute makes an attempt to tax property as such. Money is property as much as is real estate.

It is not necesary to claim that section 4266 is unconstitutional and void as to everybody and under all circumstances. We go no further than to contend that, as applied to these parties, corporate and individuals, and their holdings of turpentine leases, which are nontaxable, the assessments here made, as claimed to be based on section 4266, are unconstitutional.

Upon the hypothesis that the money invested in these nontaxable turpentine leases is money "employed in any kind of trade or business," the taxation of them against one "in any kind of trade or business" and nontaxation of the same investments be one not "in any kind of trade or business" is palpable discrimination. The defendant, Harrison Naval Stores Company, is engaged in the turpentine manufacturing business in Mississippi; the Union Naval Stores Company is not so engaged in this state. Defendant Jones is engaged in business, and other individuals owning such leases are not. Shall the one be taxed and the other exempted when both are entitled to the equal protection of the law? Suppose, again, that all these leases had been purchased by Mr. Jones, a nonresident individual and retired capitalist, who had quit "any kind of trade or business," and merely bought as independent, casual speculations, thousands of acres of timber and turpentine rights. Clearly, he is not taxable on turpentine leases under this section. Are not these parties entitled to the equal protection of the law with this retired speculator-capitalist?

There is a rational interpretation that may be put upon this statute to save it from unconstitutionality, but it will not apply to or support these assessments. The rational interpretation is in harmony with similar statutes in other states. In such states the tax is usually upon the "capital invested or employed within the state," but it is uniformly interpreted as being upon the investment itself--that is, the property bought and owned--rather than upon the amount expended for such investments.

The amount expended, or a large part of it, may have been squandered, so that the investment is worth much less than it cost; or it may have been purchased property rapidly enhancing in value. In either case the cost price, the amount invested, is no criterion of value, and is out of harmony with a constitutional requirement of an ad valorem assessment on a present value, not past or future value. The present value of the investment in its new form--the property required with the money invested--is the only chiterion accepted. All the authorities base the assessment on the property and its assessed value, and they consider it, and uphold it, as a tax on the property itself. With equal uniformity the property itself determines its taxability, and when capital is invested in nontaxable property, such "investment" is held to be nontaxable, of course.

"When the tax is really laid upon the franchise of the corporation, although measured by the amount of its capital stock, the manner in which the capital is invested is not material; but if the tax is really upon the property, or assets of the corporation, as represented by its capital, allowance must be made for such portion of the capital as is invested in public securities of other nontaxable property." 37 Cyc. 820; Chicago v. Lunt, 52 Ill. 414; Whitney v. Madison, 23 Ind. 331; G. A. S. Bk. v. Burlingtoon, 54 Ia. 609, 7 N.W. 105; State v. Rogers, 79 Mo. 283; People v. Barker, 154 N.Y. 128, 47 N.E. 973; N.Y. v. N.Y. Tax. Co., 2 Wall 200, 17 L. E. N. 793.

A tax assessed on the capital stock of a corporation is a tax on the property of which such capital is composed." Whitney v. Madison, 23 Ind. 331, 336.

For the purpose of such a statute the amount of capital employed in the state is measured by the total value of the property within the state owned by the corporation, and used by it in the transaction of its ordinary business. People v. Wemple, 150 N.Y. 46, 44 N.E. 878; People v. Wemple, 133 N.Y. 323, 31 N.E. 238. As distinguished from a mere independent investment. People v. Wemple, 150 N.Y. 46, 44 N.E. 787.

The money invested by the Union Naval Stores Company in leases for turpentine which it does not exercise and only sells again as an investment, and which, if and when operated are always worked by other parties, is not capital employed within the state so as to be subject to taxation.

The highest court in New York said: "Bartlett, J.:...