Opinion
No. 35000.
May 25, 1942.
1. LICENSES.
Where a person or corporation is engaged in a distinct business and as a feature thereof in an activity merely incidental which serves no other person or business, the incidental and restricted activity is not subject to separate or additional privilege or occupation tax.
2. LICENSES.
Where nonresident manufacturer of farm and industrial machinery frequently sold products on terms of part cash with balance evidenced by notes secured by conditional sales contract, and all notes and securities received by manufacturer were by way of part purchase money for its products, the manufacturer was not subject to license or occupation taxes imposed on those engaged in business of "lending money" or purchasing, discounting, or otherwise acquiring notes (Laws 1940, chap. 110).
3. STATUTES.
Taxing statutes must be construed strictly against the taxing power, and all doubts must be resolved in favor of the taxpayer.
4. LICENSES.
The fact that manufacturer of tractors sometimes purchased allied equipment appropriate to be used with tractor from allied equipment manufacturer and made sale of tractor and equipment as one transaction, and took note and security from purchaser to cover balance due on entire assembly of equipment and tractor, did not render the tractor manufacturer liable for tax imposed on those engaged in "money lending" (Laws 1940, chap. 110).
APPEAL from the chancery court of Hinds county, HON. V.J. STRICKER, Chancellor.
Greek L. Rice, Attorney-General, by Geo. H. Ethridge, Assistant Attorney-General, and J.H. Sumrall, both of Jackson, and R.W. Heidelberg, of Hattiesburg, for A.H. Stone, Chairman, State Tax Commission.
This case is controlled by the same principles as in the cases of A.H. Stone, Chairman, State Tax Commission, v. C.I.T. Corporation, 193 Miss. 344, 7 So.2d 811; and A.H. Stone, Chairman, State Tax Commission, v. Yellow Manufacturing Acceptance Corporation, 193 Miss. 338, 7 So.2d 820. Inasmuch as the same issues are involved, with a common principle in all of these cases, we are submitting herewith, as briefs in this case, the printed briefs in the cases of A.H. Stone, Chairman, State Tax Commission, v. C.I.T. Corporation, supra, and A.H. Stone, Chairman, State Tax Commission, v. Yellow Manufacturing Acceptance Corporation, supra. We have filed separate statements of facts, but there are only slight differences in the facts other than as to the names and places of doing business and offices in the state.
Chambers Trenholm, of Jackson, for Allis-Chalmers Mfg. Co.
The statute is discriminatory upon its face for failing to tax some of the persons within the class to be taxed, as said class is defined in the statute.
Laws of 1940, Ch. 110.
We do not here refer to the banks, general merchants, or dealers holding notes of their customers, but to persons lending money upon the security of tangible personal property in the state, which loans have no connection with a sale of the property, and to persons who purchase notes evidencing such loans.
This court has held that the tax here involved is a privilege tax.
Stone, Chairman, v. General Contract Purchase Corporation, 193 Miss. 301, 7 So.2d 806; Stone, Chairman, v. General Electric Contracts Corporation, 193 Miss. 317, 7 So.2d 811.
We take the position that because of the fact that of two persons doing the same business, and within the same legislative classification, one is taxed for the doing of that business, and the other is not, the statute having that result is unconstitutional.
Oliver Iron Mining Co. v. Lord, 262 U.S. 172, 43 S.Ct. 526; Postal Telegraph Co. v. Robertson, 116 Miss. 204, 76 So. 560; Adams v. Mississippi Lumber Co., 84 Miss. 23, 36 So. 68; Hyland v. Sharp, 88 Miss. 567, 41 So. 264; Rodge v. Kelly, 88 Miss. 209, 40 So. 552; Ballard v. Miss. Cotton Oil Co., 81 Miss. 507, 34 So. 533; Hing v. Crowley, 113 U.S. 708, 709, 5 S.Ct. 733, 28 L.Ed. 1145; 37 C.J., Licenses, 197, par. 51; 37 C.J., Licenses, 200, par. 53.
See, also, Vicksburg Bank v. Worrell, 67 Miss. 47, 7 So. 219; Sorensen v. Webb, 111 Miss. 87, 71 So. 273; Hartford, etc., Co. v. Harrison, 301 U.S. 459, 57 S.Ct. 838; C., St. L. N.O.R.R. Co. v. Moss, 60 Miss. 641; Lowry v. Clarksdale, 154 Miss. 155, 122 So. 195; Frost v. Oklahoma, 278 U.S. 515, 49 S.Ct. 235; Royster v. Virginia, 253 U.S. 412, 40 S.Ct. 561; Adams v. Standard Oil Co., 97 Miss. 879, 53 So. 692; Louisville G. E. Co. v. Coleman, 277 U.S. 32, 48 S.Ct. 423.
Privilege tax laws are to be construed strictly against the taxing power.
Stone v. Rogers, 186 Miss. 53, 189 So. 810; V. M.R.R. Co. v. State, 62 Miss. 105; State v. Mississippi P. L. Co., 161 Miss. 839, 138 So. 567; Gully v. Gulfport Loan Brokerage Co., 168 Miss. 449, 151 So. 721; Independent Linen Service Co. v. State, 169 Miss. 62, 152 So. 647; Gully v. Jackson International Co., 165 Miss. 103, 145 So. 905.
Upon this proposition, therefore, we respectfully submit that said Chapter 110, Laws of 1940, is discriminatory, hence is in violation of the uniformity, equal protection and due process clauses of the State and Federal Constitutions, and should be so declared. Also, that it is not applicable to appellee in any event.
Appellee is not doing business of lending money or purchasing, discounting or otherwise acquiring notes, its acquisition of notes being but an incident to its interstate business of manufacturing and selling machinery.
Appellee is not engaged in the business of acquiring notes, but comes into possession thereof only as an incident to the collection of the amount due it by dealers for unpaid wholesale price of machinery.
The notes in appellee's hands represent as to it only the unpaid wholesale price, hence it is in the position of the original seller, not taxed by the act.
Argued orally by E.L. Trenholm, for appellee.
Demand was made upon appellee for privilege or occupation taxes alleged to be due under Ch. 110, Laws 1940. The demand was complied with but under protest, and appellee sued to recover the payments. From the decree in appellee's favor the Tax Commissioner has appealed to this court.
Appellee is a nonresident manufacturer of tractors and other farm and industrial machinery. It sells its manufactured products in this state, through the means of resident agents, as well as by traveling representatives. It frequently sells its products on terms of part cash, with the balance evidenced in the form of installment notes, secured by conditional sales contracts, as well as sometimes on additional property, which notes and securities are held by it for collection, and the collections are made by local agents, or by traveling representatives or through remittance made direct to appellee itself. It acquires no notes or mortgages or other evidences of indebtedness save from its own customers or agents, but all such notes and securities as it receives are by way of part of the purchase money for machinery which it has itself manufactured or has otherwise acquired, owned, and sold. In brief, appellee is not doing a business of lending money, or of purchasing, discounting, or otherwise acquiring notes and securities, save as directly concerns and as an integral part of its own business of manufacturing and selling machinery.
The case falls within the principle, as respects privilege or occupation taxes, "that where a person or corporation is engaged in a distinct business and, as a feature thereof, in an activity merely incidental which serves no other person or business, the incidental and restricted activity is not to be considered as intended to be separately or additionally taxed." Craig v. Ballard Ballard Co., 189 Miss. 60, 196 So. 238, 239.
Appellee is therefore not taxable under Ch. 110, Laws 1940, and the trial court was correct in its decree to that effect. Certainly in doing as it has, appellee was not engaged in the business of lending money as mentioned in the opening terms of Sec. 1 of the Act, and if it is to be held liable thereunder it must be because of the second provision of that section, to wit, that it was "doing a business of purchasing, discounting, or otherwise acquiring notes, trust receipts, or other forms of indebtedness secured by liens," etc. But that was not its business. Its business was that of manufacturing and selling machinery, and when it took and retained notes and security for part of the purchase price of its machinery, that was an integral part and parcel of the sales — the notes and security representing in another form, as between appellee and the purchaser, the machinery itself.
What has been stated appears, we think, clearly enough from a careful analysis of the Act, especially when viewed in the light of the Ballard case, supra, but if its meaning in this respect were susceptible of doubt, the same result would follow under the familiar rule that taxing statutes must be construed strictly against the taxing power, and all doubts resolved in favor of the taxpayer.
We have not overlooked the feature that in some cases there would be involved what is termed "allied equipment," but which was appropriate to be used with the tractors manufactured by appellee. In these cases appellee would include this equipment in the sale to the customer as one transaction, would pay directly to the manufacturer of the allied equipment the price therefor, and would then take notes and security from the customer to cover the balance due on the entire assembly of the equipment; but no notes or securities were taken from the customer payable to the owner or manufacturer of the allied equipment, but, as stated, appellee itself would pay for the allied equipment, becoming thereby the owner thereof so far as concerns the sales to, and the securities from, the customer.
Nor have we failed to consider the argument made by appellant, when the customer's notes and the security therefor are made payable to the dealer, or to his order, as is sometimes the case, and these are thence transferred to appellee whereby the dealer would receive credit on what would otherwise be or become a debt due by the dealers to appellee, this would be, according to appellant, a purchase by appellee of the notes and securities thus transferred. Even so, the dealer would be a link in appellee's own chain between itself and its ultimate customer or purchaser and the transaction would still be but an integral means, and its own means, by which appellee promotes the consummation of its sales to its ultimate and real customers or purchasers.
Affirmed.