Opinion
No. 4888.
Argued February 8, 1961.
Decided March 20, 1961.
1. A yield tax was properly assessed under RSA 79:3 against an independent contractor upon the timber cut by it in clearing operations on lands of the United States under a contract with the government whereby the merchantable timber became the property of the contractor.
2. A construction company in severing timber from land of the United States under a government contract acted as an independent contractor and not as a governmental instrumentality and the assessment of a state yield tax upon such timber against the contractor is not a tax against the United States.
3. The validity of the assessment of the yield tax upon the timber cut on lands of the United States was not affected by the fact that neither the standing timber nor the equipment used in severing the timber was subject to the general property tax.
4. Jurisdiction over the land acquired by the United States for the Pease Air Force Base in Newington was not ceded by RSA ch. 123; and until jurisdiction has been formally accepted by the United States the territorial jurisdiction of this state continues (40 U.S.C.A., s. 255).
ACTION, to recover a timber yield tax assessed for the year 1953 on certain stumpage at the time of severance (RSA 79:3) and for the collection of a personal property tax assessed against certain personal property of the defendant located on lands of the United States at the time of the assessment during the clearing operations for construction of the Pease Air Force Base in Newington. The defendant entered into a contract with the United States on November 20, 1952, by the terms of which it was to clear certain lands of trees in Newington and Portsmouth acquired by the United States by deed or condemnation, the pertinent provisions of which provide:
"TP-04. DISPOSAL OF CLEARED MATERIAL. All material from the clearing operations shall be burned, except that merchantable timber shall become the property of the contractor and shall be removed from the site or may be burned at his option. Stumps and residue from burning operations shall be disposed of in an area designated on the drawings as `Stump Disposal Area'. Areas designated for burning will be within the areas to be cleared . . . ."
The contract further permitted the defendant to hire subcontractors under certain conditions. The defendant contracted with four subcontractors who, together with the defendant, cut certain timber on the property, and each was assessed a timber yield tax.
The defendant filed a "notice of cutting" (RSA 79:9) but did not file a report of cutting. RSA 79:10. No appeal or request for abatement of taxes was requested under RSA 79:4. Trial by the Court (Sullivan, J.) who found a verdict for the plaintiff in the amount of $1,250 for the amount of the timber yield tax but disallowed the personal property tax assessed on certain pieces of machinery used in cutting and removing the lumber.
The defendant's exceptions were reserved and transferred.
Boynton, Waldron Dill (Mr. Dill orally), for the plaintiff.
Fisher, Parsons Moran (Mr. Moran orally), for the defendant.
Louis C. Wyman, Attorney General and Frederic T. Greenhalge, Assistant Attorney General (Mr. Greenhalge orally), for the State of New Hampshire, amicus curiae.
The sole issue presented here is whether a private contractor is liable to the town of Newington for a yield tax on timber cut by it during clearing operations on lands owned by the United States.
The defendant contends that under RSA ch. 123, the standing timber was not subject to the general property tax at the time of cutting and consequently there can be no valid assessment of a yield tax as a substitute for a general property tax which could not be levied for lack of jurisdiction.
The defendant further points out that because the Court below has found and ruled the defendant is not liable for a personal property tax assessed on its equipment located on government property it was implicit in such ruling that neither the State nor its subdivisions has the power to assess taxes of any character against these lands or on any personal property located thereon. Scribner v. Wikstrom, 93 N.H. 17. See Franklin v. Coleman Bros., 152 F.2d 527 (1st Cir. 1945).
Since M'Culloch v. Maryland, 4 Wheat. (U.S.) 316, it is fundamental law that a state has no power to levy taxes on property of the United States or its instrumentalities. But since James v. Dravo Contracting Co., 302 U.S. 134 (1937) the decisions in a variety of situations have held that a private person operating under a government contract cannot escape taxation on the "theoretical conceptions" of interference with governmental functions. "And where it merely appears that one operating under a government contract or lease is subjected to a tax with respect to his profits on the same basis as others who are engaged in similar businesses, there is no sufficient ground for holding that the effect upon the Government is other than indirect or remote." Helvering v. Producers Corp., 303 U.S. 376, 386, 387.
As this court has previously pointed out, the timber tax on severance of timber is not a property tax, but as the Trial Court correctly ruled, "is a tax on the severance of timber," imposed upon the owner by reason of the severance. Opinion of the Justices, 84 N.H. 559, 575; Opinion of the Justices, 99 N.H. 532, 534; see Brock v. Farmington, 98 N.H. 275, 280; Brown v. Rye, 101 N.H. 92.
The statute (RSA 79:1) contemplated assessing a yield tax against any owner ". . . including a purchaser of public forest timber, having title to lands or standing trees or possession with authority to cut and remove logs or wood from lands or standing trees from which any logs or wood are taken during the tax year."
Under the terms of its contract with the United States, all merchantable timber became the property of the defendant, and it could be found that the timber was cut during the tax year October 1952 — October 1953. RSA 79:1, 3.
RSA ch. 123 did not purport to cede jurisdiction over this land. Cf. Laws 1955, c. 223. No statute purports to exempt an owner of timber on such land from the yield tax; and until jurisdiction is formally accepted by the United States the territorial jurisdiction of the State continues. 40 U.S.C.A., s. 255. See Cook v. Wilson, 208 Ark. 459. There was no evidence to warrant a finding that the United States has assumed exclusive jurisdiction of the land in question.
The defendant here was not an instrumentality of the United States but acted entirely as an independent contractor. The yield tax was not levied directly against the United States or its property but against the defendant. Mississippi River Fuel Corporation v. Fontenot, 234 F.2d 898 (5th Cir. 1956); Detroit v. Murray Corporation, 355 U.S. 489. In Fontenot the court upheld a Louisiana gas severance tax levied against a private oil and gas producer taking gas from government property under lease. The court observed that the gas severance tax was directed at all persons who are severers of gas and that if the operator was liable "he cannot draw around himself a cloak of immunity because the United States is lessor, but must, as a part of the consideration for the lease and his obligation under the statute, pay the taxes which the severance tax statutes impose." Id., 902.
In a number of jurisdictions it has been held that a private contractor can be taxed for timber cut on government land under lease or sale. Cook v. Wilson, 208 Ark. 459; Hines Lumber Co. v. Lane County, 196 Or. 420.
We conclude that the yield tax was properly levied against the defendant.
Remanded.
All concurred.