Summary
In Aponaug Mfg. Co. v. State Tax Comm., 190 Miss. 805, 1 So.2d 763, affirmed Aponaug Mfg. Co. v. Stone, 314 U.S. ___, 62 S.Ct. 131, 86 L.Ed. ___, and in Stone, Chairman, v. Green Lbr. Co., 191 Miss. 414, 1 So.2d 764, we had under consideration the question of the privilege tax on the manufacture or processing of articles of personal property, the latter being a case wherein the processed product was sold directly to the United States.
Summary of this case from Cook v. StoneOpinion
No. 34534.
April 28, 1941. Suggestion of Error Overruled, May 26, 1941.
1. PLEADING.
Pleadings will be taken the strongest against the pleader.
2. COMMERCE.
The tax upon business or activity of manufacture done in state, as applied to company operating cotton mills manufacturing bolts of cotton out of cotton in bales, and selling manufactured products chiefly in other states in one of which products are subject to sales tax, is not invalid as undue burden on "interstate commerce," notwithstanding primary method for determining volume of production was to measure it by amount of sales of produced articles, where method was merely a convenience in arriving at quantity of production and distinct local activity was the real subject of exaction (Laws 1934, chap. 119, sec. 2).
APPEAL from the circuit court of Hinds county, HON. J.P. ALEXANDER, Judge.
Ben F. Cameron and Lester E. Wills, both of Meridian, and Geo. E. Shaw, of Jackson, for appellant.
Any state tax which directly burdens interstate commerce is invalid under the commerce clause, even though the tax be non-discriminatory.
Robbins v. Shelby County Taxing Dist., 120 U.S. 489, 497, 30 L.Ed. 695; Spalding Bros. v. Edwards, 262 U.S. 66, 69, 67 L.Ed. 865.
The converse is that a tax which may indirectly burden interstate commerce is not unconstitutional if it does not discriminate in favor of intrastate transactions.
Texas Transport and Terminal Co. v. N.O., 264 U.S. 150, 155, 68 L.Ed. 611.
A tax levied on gross receipts from sales is obviously distinguishable from an income tax in that the burden of the tax must be borne by each individual sale, whether profitable or not. Denominating such a tax as a tax on the privilege of doing business does not diminish the directness of its effect upon interstate sales, and as to such transactions it is unconstitutional.
U.S. Glue Co. v. Town of Oak Creek, 247 U.S. 321, 62 L.Ed. 1135.
If a just and fair method of apportioning a general excise tax to the intrastate business carried on within the taxing state can be formulated as the basis of a tax, such a tax may be levied, even though, in practical effect, the tax is borne by both interstate and intrastate business.
Maine v. Grand Trunk Ry., 142 U.S. 217, 35 L.Ed. 994.
In Western Livestock v. Bureau of Revenue, 303 U.S. 250, 82 L.Ed. 823, the court upheld a tax upon the gross receipts from advertising received from customers outside the state for publication in a magazine distributed in interstate commerce. There the transaction was an integral part of interstate commerce, but there was no possibility that the taxes to be levied might be multiplied, and there was no evidence or indication that the tax would be burdensome.
The vice characteristic of those taxes which have been held invalid is that they have placed on the commerce burdens of such a nature as to be capable, in point of substance, of being imposed . . . with equal right by every state which the commerce touches, merely because interstate commerce is being done, so that without the protection of the commerce clause it would bear cumulative burdens not imposed on local commerce. . . . The multiplication of state taxes measured by the gross receipts of interstate transactions would spell the destruction of interstate commerce.
Western Livestock v. Bureau of Revenue, 303 U.S. 250, 82 L.Ed. 823; Adams Mfg. Co. v. Storen, 304 U.S. 307, 82 L.Ed. 1365; Gwin, White and Prince v. Henneford, 305 U.S. 434; McGoldrick v. Berwind-White Coal Min. Co., 84 L.Ed. 565, 309 U.S. 33.
Logic dictates that where the elements of the sale are divided among several states, only that state where delivery is made should have the power to tax the transaction, since the property is brought within its jurisdiction by delivery, its taxable assets are used as consideration for the purchase, and the use or disposition of the article will be subject to its regulation or control. In this case we need not rely on the sole element of delivery. Under the facts alleged and admitted, the contract of sale, delivery and purchase are all consummated outside the State of Mississippi. The sole claim of the state of manufacture to the right to tax must be the fact that it is the state of origin of the goods moving interstate to fulfill a contract made elsewhere, for consideration paid or to be paid elsewhere, and for delivery, use and consumption in another state.
Where a series of taxes by several states is upheld, it is on the theory that the tax is levied upon a purely local activity completed and repeated in the several taxing states. Such cases have no application here.
W.D. Conn, Jr., Assistant Attorney General, for appellees.
The character of the tax here involved cannot, as we think, be brought in question on this appeal. This has been heretofore before the court and has been decided. It is a privilege tax, not a property tax, and the levy thereof is within the legislature's constitutional power and does not run counter to the Equal Protection Clause of the Fourteenth Amendment to the Federal Constitution.
Southern Package Corp. v. State Tax Com., 174 Miss. 212, 164 So. 45; Notgrass Drug Co. v. State ex rel. Rice, 175 Miss. 358, 165 So. 884.
Appellant in its brief refers to various tests resorted to by the courts to determine the constitutionality of statutes imposing taxes on sales, such as the "direct burden" test and the "multiple burdens" test, but we submit that these so-called tests are not involved here because no tax on interstate sales is here involved. The tax here involved is on the privilege of manufacturing and not on sales, the sales being only the measure of value on which the tax may be computed.
The business of manufacturing is a local activity, and the legislature has the undoubted right to levy a tax upon the privilege of engaging or continuing to engage in that local activity without regard to the Commerce Clause of the Federal Constitution under the well-established rule that commerce does not begin until manufacture is completed.
Cornell v. Coyne, 192 U.S. 418, 24 S.Ct. 383, 48 L.Ed. 504; U.S. v. Knight Co., 156 U.S. 1, 15 S.Ct. 249, 39 L. Ed. 325; Utah Power Light Co. v. Pfost, 76 L.Ed. 1038, 286 U.S. 165.
The statute involved in this case levies the tax upon a person engaged in the manufacture of products for sale, and the tax is not levied upon the sale of such products.
So. Package Corporation v. State Tax Com., 174 Miss. 212, 164 So. 45; Notgrass Drug Co. v. State ex rel. Rice, 175 Miss. 358, 165 So. 884; Jackson Fertilizer Co. v. Stone, 173 Miss. 183, 162 So. 170.
A privilege tax exacted for the privilege of engaging in the manufacture of products does not violate the Commerce Clause of the Constitution even though the tax is measured by the sales price of the product in interstate commerce.
Am. Mfg. Co. v. St. Louis, 63 L.Ed. 1084, 250 U.S. 459; Utah Power Light Co. v. Pfost, 286 U.S. 165, 76 L.Ed. 1038; Adams Mfg. Co. v. Storen, 304 U.S. 307, 82 L.Ed. 1365; McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33, 84 L.Ed. 565; Western Livestock v. Bureau of Revenue, 303 U.S. 250, 82 L.Ed. 823.
Argued orally by Ben F. Cameron, for appellant, and by W.D. Conn, Jr., for appellees.
Appellant is engaged in the operation of cotton mills at various points in this State. The State Tax Commissioner has demanded of and collected from appellant, and appellant has paid under protest, the tax or remuneration required by Section 2, Chap. 119, Laws 1934, which, so far as material to this case, is as follows:
"There is hereby levied and shall be collected annual privilege taxes, measured by the amount or volume of business done, against the persons, on account of the business activities, and in the amounts to be determined by the application of rates against values, or gross income, or gross proceeds of sales, as the case may be, as follows: . . .
"Upon every person engaging or continuing within this state in the business of manufacturing . . . for sale, profit or commercial use . . . any article or articles, substance or substances, commodity or commodities, the amount of such tax to be equal to the value of the articles, substances, or commodities, manufactured, compounded, or prepared for sale, as shown by the gross proceeds derived from the sales thereof by the manufacturer . . . multiplied by the respective rates as follows: . . .
"The measure of this tax is the value of the entire product manufactured, compounded, or prepared, in this state, for sale, profit or commercial use, regardless of the place of sale or the fact that deliveries may be made to points outside the state.
"If any person liable for any tax under this section shall ship or transport his products, or any part thereof, out of this state without making sale of such products, the value of the products in the condition or form in which they existed immediately before transportation out of this state shall be the basis for the assessment of the tax imposed in this section. . . ."
It is conceded that the amount of the tax applicable in the present case, if applicable at all, is one-fourth of one per cent, ascertained or computed as set forth in the foregoing quotations.
Appellant sells its manufactured cotton goods chiefly in states other than this State. About two-thirds of its products are shipped to and sold in the City of New York, and is said to be there subject to the sales tax imposed by that city. Appellant contends that this exposes it to cumulative or multiple burdens in violation of its rights in interstate commerce, and that the one-fourth of one per cent tax exacted by this State, as above set out, ought to be stricken down as an undue burden on interstate commerce, or as an unlawful imposition upon appellant in its business in interstate commerce. Appellant relies chiefly on such recent cases as Western Live Stock v. Bureau of Internal Revenue, 303 U.S. 250, 58 S.Ct. 546; 303 U.S. 823, 115 A.L.R. 944; Coverdale v. Arkansas-Louisiana Pipeline Co., 303 U.S. 604, 58 S.Ct. 736, 82 L.Ed. 1043; Adams Mfg. Co. v. Storen, 304 U.S. 307, 58 S.Ct. 913, 117 A.L.R. 429; Gwin et al. v. Henneford, 305 U.S. 434, 59 S.Ct. 325, 83 L.Ed. 272, and McGoldrick v. Berwind-White Coal Co., 309 U.S. 33, 60 S.Ct. 388, 84 L.Ed. 565, 128 A.L.R. 876.
Taking the pleadings strongest against the pleader, we must assume that the business of appellant as a manufacturer of cotton goods in this State is such that at its factory or factories it receives the cotton in bales as it comes from the gins or compresses, and thence with men and machinery it puts this cotton through all the required processes until turned out in bolts of cloth ready to be sold as such in the markets both intrastate and interstate. For the protection in all its manifold forms afforded by the State to appellant, and those likewise engaged within this State, in the peaceable pursuit of that business or activity and in the process thereof, the State exacts the remuneration which is prescribed by the quoted statute, and it is immaterial by what name the remuneration is designated. Names are unimportant, since the facts remain the same, whatever the set-up thereof may be called.
Nor are these definite facts, and the remuneration exacted when the facts are present, to be displaced by or confounded in what is referred to as multiple taxes merely because other or further taxes may be imposed when the goods are sold or manufactured into garments in another state, or in this State. Certain it is that no tax will, for it cannot, be again imposed for the exercise of the activity which is described in the preceding paragraph — the simple reason being that under physical facts there cannot again be actively or actually done anywhere what has already here been done as thus described.
And the exacted remuneration is laid upon the fair and just basis of the volume of the production; and while the primary, but not the exclusive, method for determining the volume is to measure it by the amount of the sales of the produced articles, this does not make the sales the subject of the exaction, but it is merely a convenience in arriving at the quantity or extent of the production, so that nevertheless, the distinct local activity in the production is the real subject of the exaction. All that is required as the factual basis of a sales tax, as such, is that there shall be an executed sale, and this without regard to where, when, or by whom the vended article was manufactured. The tax we are here considering is not upon sales, but upon the business or activity of manufacture done in this State — the producing of the article for sale, wherever it may be that it is then sold; and in upholding the tax we have the definite support of American Mfg. Co. v. St. Louis, 250 U.S. 459, 39 S.Ct. 522, 63 L.Ed. 1084, which as we think has not been displaced by any subsequent ruling of the federal Supreme Court.
Affirmed.
Alexander, J., took no part in the decision of this case.