Western Union Telegraph Co. v. Query
Decision Date | 20 December 1927 |
Docket Number | 12338. |
Parties | WESTERN UNION TELEGRAPH CO. v. QUERY et al., South Carolina Tax Commission. |
Court | South Carolina Supreme Court |
Appeal from Common Pleas Circuit Court of Richland County; W. H Townsend, Judge.
Action by the Western Union Telegraph Company against W. G. Query and others, individually and as members of and constituting the South Carolina Tax Commission. Order sustaining demurrers to the complaint, and plaintiff appeals. Affirmed.
The order of W. H. Townsend, circuit judge, sustaining the demurrers, was as follows:
In this action the plaintiff seeks to recover certain income taxes paid to defendants under protest, on the gronud that they were, it is contended, illegally exacted. The defendants demur on the ground that the complaint does not state facts sufficient to constitute a cause of action, in that it appears upon the face of the complaint (1) that the income taxes in question were assessed and collected in accordance with the statutes of this state; and (2) that in no event can the tax commissioners be held individually liable for a mistake in their construction of the tax laws; and I, at the hearing before me, suggested and heard argument on the third question, whether any action at law will lie to recover such taxes paid under protest, especially where, as in this case the action is brought more than 30 days after such payment was made.
All counsel asked me not to dismiss the complaint on this third ground, without considering and deciding the first two questions specified and made in the written demurrers.
The plaintiff relies upon the construction given the words "business done within the state," in the case of the Southern Railway Co. v. A. W. Jones et al., by Judge M. L. Smith, my predecessor as judge of this circuit, for which I have the highest regard, of date February 19, 1917, in construing the Annual License Tax Laws, title 3, art. 6, Civil Code of Laws of South Carolina 1912, which excludes transactions of interstate business or commerce, in determining the amount of gross earnings or receipts of the railway company for business done within the state, to be taken as the basis of assessing the annual license fee to be paid by the railway company for the privilege of doing business in this state (Pacific Express Co. v. Seibert, State Auditor, 142 U.S. 339, 12 S.Ct. 250, 35 L.Ed. 1035), and also on the recent case of Converse v. Northern Pacific Railway Co. (C. C. A.) 2 F. (2d) 959.
In the Converse Case, the Circuit Court of Appeals well said:
In the statute now under consideration, the state of South Carolina adopted the federal income tax law for the purpose of determining the amount of net income upon which income taxes are to be paid to this state-that is, for the purpose of fixing the amount of said income tax and the payment and collection thereof-with a provision that "foreign corporation," such as this plaintiff, "doing business within this state, not required nor making returns to the government of the United States of income as accruing from business done and transacted within the state, shall make returns under oath to the tax commissioner of their incomes accruing from business done or transacted within the state by them *** for the purpose of computing the amount of tax on their incomes due the state hereunder," to the end that there shall be paid to the state 33 1/3 per centum of the amount required to be paid to the United States government, subject to certain exemptions and deductions specified in the act, as income tax on account of such net income from business done or transacted within this state. See statute above cited, and Lancaster Cotton Mills v. S.C. Tax Commission, 132 S.C. 466, 129 S.E. 431; Santee Mills v. Query et al., 122 S.C. 158, 115 S.E. 202; Crescent Manufacturing Co. v. S.C. Tax Commission, 129 S.C. 480, 124 S.E. 761.
The intention is evident in the statute that the foreign corporation should pay to the state one-third of the income tax paid the federal government on net income from its business operations within the state, without making any distinction between intra and inter state transactions.
The statute now under consideration differs materially from the License Tax Act under consideration in Southern Railway Co. v. Jones, in that this statute lays a tax on only the net income from all business done within the state. "The tax only deals with that part of the fruits of 'interstate' commerce which remains as the net proceeds after all the immediate burdens of the commerce have been discharged, and such net profits are merged in the assets of the corporation." United States Glue Co. v. Town of Oak Creek, 161 Wis. 211, 153 N.W. 241, Ann. Cas. 1918A, 421, affirmed in 247 U.S. 321, 38 S.Ct. 499, 62 L.Ed. 1135, Ann. Cas. 1918E, 748. See, also, Peck v. Lowe, 247 U.S. 165, 38 S.Ct. 432, 62 L.Ed. 1049; Shaffer v. Carter, 252 U.S. 37, 40 S.Ct. 221, 64 L.Ed. 445; Bass, Ratcliff & Gretton, Lt., v. State Tax Commission, 266 U.S. 271, 45 S.Ct. 82, 69 L.Ed. 282.
The allocation of the proportion of net income to business done within the statute has not been questioned either before the tax commission, nor in this court, except in so far as it now argued that the statute prescribes no method for such allocation, citing Commonwealth v. P. Lorillard Co., 129 Va. 74, 105 S.E. 685, and on that ground it is contended the allocation is illegal. Our statute in section 2 requires such allocation to be made by the taxpayer in his returns to the tax commission; and, in case the taxpayer fails to make such allocation, the tax commission is required to make it; and in section 4 the commission is authorized to formulate and promulgate such rules and regulations as are necessary for the purpose of such allocation. Such provisions were absent in the Virginia statute; and such delegation of administrative power to the tax commission and its action thereunder is legal. Charleston Oil Co. v. Carter, 131 S.C. 466, 128 S.E. 8. Note the method of allocation adopted in New York. People ex rel. Alpha Portland Cement Co. v. Knapp, 230 N.Y. 48, 53, 129 N.E. 202.
I therefore conclude that the income taxes in question were assessed and collected in accordance with law, and the demurrer interposed to the complaint by the tax commission is sustained, and it is so ordered.
As to the demurrer by the individual tax commissioners, the plaintiff contends:
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