Stone v. General Electric Contracts Corp.

This case furnishes occasion to apply the distinction urged in the specially concurring opinion in Stone, Chairman, v. General Contract Purchase Corporation, 193 Miss. 301, 7 So.2d 806, this day decided, wherein the view was expressed that since the appellee was doing business in this state and therefore liable to privilege tax therefor *Page 332 there was no need to consider whether the paper or securities were purchased within or without the state such being merely a basis for computing the amount of the tax. The instant case, however, fixes attention upon the status of appellee as a non-resident transacting its business in interstate commerce. To allow imposition of a privilege tax here would mean that the factors by which the extent of liability was to be calculated were employed to fix the liability itself.

It would seem elemental that while the legislature could regulate certain incidents of such business, it could not prevent its conduct and is therefore impotent to require prepayment of a privilege tax therefor. If the non-resident is to enjoy an untrammeled commerce it is fatuous to seek to justify the taxation of such commerce by an alleged vouchsafing of equal protection and privileges which the state is without power to withhold. The right to solicit business, to exact security for its advances, to seek the aid of the courts in enforcing obligations, or to maintain a supervision in the exercise of business caution is indeed valuable but not valuable consideration. I need not elaborate the point given prominence in the majority opinion, that the appellee, but for the tax would enjoy an annual gross business of over half a million dollars derived from our citizens without paying for such privilege. The obverse of this proposition is that such amount could as aptly be seen as the measure of benefits accorded our citizens by the appellee whose funds are at the request of these citizens, drawn into our state for their assistance. However, I dismiss these considerations as irrelevant to the merits of the case. Nor is the size or wealth of the non-resident corporation relevant nor the amount of its business except as a factor in computing the amount of the privilege tax for which the corporation has theretofore otherwise become liable. I do not decry the growing tendency to enlarge the expanding areas of state taxation nor seek to impede the accession of state power to exact revenue upon the basis of *Page 333 benefits which it has accorded to corporations functioning by its leave, but I am unable to see in any of our modern decisions any warrant for the re-definition by our own legislature of interstate commerce. The cases selected by appellee as bases for its contentions seem not to have undergone thorough inspection for their stability to this end. In Stone v. Interstate Natural Gas Co., 5 Cir., 103 F.2d 544, the appellee was duly authorized to do business in this state. The transactions incident to such privilege were held to be legitimate bases for the calculation of the tax, liability for which having arisen because it elected to engage in business in the taxing state. This case may be contrasted with State Tax Commission v. Interstate Natural Gas Co., 284 U.S. 41, 52 S.Ct. 62, 76 L.Ed. 156, where the same appellee was held immune to a state privilege tax for selling to distributors in this state natural gas piped from another state as being a burden on interstate commerce.

It is likewise important to note that in the following cases relied upon by appellant the taxpayer was formally admitted to do business in the taxing state: Butler Bros. v. McColgan, 62 S.Ct. 701, 86 L.Ed. 991; Nelson v. Sears, Roebuck Co., 312 U.S. 715, 61 S.Ct. 803, 85 L.Ed. 1145; State of Wisconsin v. J.C. Penney Co., 311 U.S. 435, 61 S.Ct. 246, 85 L.Ed. 267, 130 A.L.R. 1229; Great A. P. Tea Co. v. Grosjean, 301 U.S. 412, 57 S.Ct. 772, 81 L.Ed. 1193, 112 A.L.R. 293; Southern Natural Gas Co. v. State of Alabama, 301 U.S. 148, 57 S.Ct. 696, 81 L.Ed. 970; and other cases cited by counsel. I find more in point those cases where the initial liability was imposed upon a non-resident admitted to do business in the taxing state despite the incident of proposed sales of its manufactured products in interstate commerce. Among these are Jackson Fertilizer Co. v. Stone, 173 Miss. 183,162 So. 170; Southern Package Corp. v. State Tax Commission, 174 Miss. 212,164 So. 45; Compress of Union v. Stone, 188 Miss. 49,193 So. 329; Aponaug Mfg. Co. v. State Tax Commission, 190 Miss. 805, 1 So.2d 763; *Page 334 Stone v. Green Lbr. Co., 191 Miss. 414, 1 So.2d 764. It was said in State of Wisconsin v. J.C. Penney Co., supra [311 U.S. 435, 61 S.Ct. 250, 85 L.Ed. 267, 130 A.L.R. 1229], that "The substantial privilege of carrying on business in Wisconsin,which has here been given, clearly supports the tax." (Italics supplied)

In Stone v. Interstate Natural Gas Co., supra [103 F.2d 548], the franchise tax was computed with reference to the amount of capital used, invested, or employed in the state by corporations "now, or hereafter doing business within this state." It is true that in the Act there involved (Ch. 121, Laws 1934) a new meaning was sought to be given to the phrase "doing business," referred to by the court as "the Legislature's queer definition" and that a similar enlargement of its meaning is incorporated in the Act here involved (Sec. 5, Ch. 110, Laws 1940). Yet it may well be doubted whether the conventional meaning can be expanded without impairing constitutional limitations. It seems clear that this section will have to enlarge the conventional definition if the state is held to have the right to impose a privilege tax upon a non-resident which has contracts submitted to it through the mail and maintains no agency in this state. Section 5, when stripped of unnecessary detail, is as follows: "Doing business . . . include[s] . . . every act . . . incident to . . . the lending of money . . . secured . . . by liens on . . . personal property located in the state . . . and the enjoyment of . . . every right [on] which . . . the state . . . can lawfully levy and collect a privilege tax." In other words, the legislature sought to include in the definition the doing of any act which it has the right to tax. It does not enlarge the legal definition of what it has the right to tax nor does it in fact enlarge the definition of "doing business" since the mere fact that an act may be incident to the business of buying negotiable paper cannot change the interstate transaction into an intrastate one. Section 5 therefore merely is an explanation *Page 335 by the legislature as to why it felt justified in taxing the privilege of purchasing such contracts, even as in Section 1 it explains that "the amount of said tax to bear a direct relationship to the value of the securities . . . acquired . . . and exacted in return for the protection afforded by the . . . state in the enjoyment of such ownership and rights acquired thereby."

In the case last cited appellee had installed, owned and used a pipe line in the State of Mississippi. Analogy was drawn to the right to tax non-residents for the use of our highways. In the instant case the appellee does not own property in the state. Its rights in the personal property made collateral security for obligations due it is inchoate and may never ripen into absolute ownership by foreclosure. In such latter event its ownership would become a mere incident of its primary interstate business and effect no change in its liability or status. Yellow Acceptance Corp. v. American Oil Co., 191 Miss. 757,2 So.2d 834, and cases cited. We have held that the tax is not a property tax. Stone v. General Contract Purchase Corp., 193 Miss. 301,7 So.2d 806, this day decided. The property acquired and owned by appellee — "notes, trust receipts, or other forms of indebtedness" — are in normal course acquired and owned outside the state.

Reliance by the Court upon McGoldrick v. Berwind-White Coal Min. Co., 309 U.S. 33, 60 S.Ct. 388, 394, 84 L.Ed. 565, 128 A.L.R. 876, does not appear to be justified. This case involves imposition of a sales tax upon transactions consummated within the taxing state. Such transactions were insulated against contract with interstate commerce by viewing the tax as applying only to sales upon "merchandise . . . transported in interstate commerce and brought to its journey's end." That the interstate aspect of the business was out of the picture is shown by the court's observation that "Apart from these more fundamental considerations which we think are of controlling force in the application of the commerce clause, we can find no adequate basis for distinguishing *Page 336 the present tax laid on the sale or purchase of goods upon their arrival at destination at the end of an interstate journey from the tax which may be laid in like fashion on the property itself." It is further clear that the court was solicitious to avoid impairment of the immunity of interstate commerce by stating: "Certain types of tax may, if permitted at all, so readily be made the instrument of impeding or destroying interstate commerce as plainly to call for their condemnation as forbidden regulations. Such are the taxes already noted which are aimed at or discriminate against the commerce or impose a levy for the privilege of doing it, . . ."

The bother of the matter is that, if Section 5 of Ch. 110, Laws 1940, is allowed to enlarge the conventional meaning of doing business so as to include the acquisition by a non-resident of commercial paper, from citizens of this state, it not only redefines doing business but also interstate commerce. It should be evident that this court has allowed the legislature to repeal a long line of decisions defining what constitutes doing business in this state. Among these are Yellow Mfg. Acceptance Corp. v. American Oil Co., supra; Refrigeration Discount Corp. v. Turley,189 Miss. 880, 198 So. 731; Wiley Electric Co. v. Electric Storage Battery Co., 167 Miss. 842, 147 So. 773; Marx Bensdorf, Inc., v. First Joint Stock Land Bank, 178 Miss. 345, 173 So. 297; Dodds v. Pyramid Securities Co., 165 Miss. 269, 147 So. 328; North American Mortg. Co. v. Hudson, 176 Miss. 266, 168 So. 79; C.I.T. Corp. v. Stuart, 185 Miss. 140, 187 So. 204; Union Cotton Oil Co. v. Patterson, 116 Miss. 802, 77 So. 795; City Sales Agency v. Smith, 126 Miss. 202, 88 So. 625; Harleston v. West Louisiana Bank, 129 Miss. 111, 91 So. 423; Item Co., Ltd., v. Shipp, 140 Miss. 699, 106 So. 437; Smith v. J.P. Seeburg Corp.,192 Miss. 563, 6 So.2d 591.

I assent to the contention of counsel that the legislature may deliberately give to words a meaning at variance with or, indeed, opposite to their usual connotation. It may define as black that which is white. Yet this is *Page 337 true only where it has the right to deal freely with that which theretofore was white. It may not disguise interstate commerce in the vestments of that which is intrastate and justify a domination thereof. That we may discover how far afield from the foregoing decisions we are being led let us support that a non-resident motor company in Michigan shipped its automobiles to individual purchasers here. There could be imposed no privilege tax for such transaction. Add the elements of personal solicitation of orders by salesmen to be transmitted to and accepted in Michigan; add the incidents of sales on deferred payments with retained liens as security; include further the right of the seller to enforce collection by foreclosure or the use of our courts. Finally let the process become more complex until it reaches the intricacies of the instant procedures. At what stage has the process ceased to be interstate commerce and when has it begun to do business in this state so as to require the filing of its charter? Does not the constant factor of its non-residence and its employment of interstate commerce for its negotiation, purchase and collection persist to control its non-liability? There is an important distinction between getting business from and doing business in this state.

No one could doubt that the cases last cited are infused with the principle that to compel the non-resident to domesticate or file its charter in this state before bringing suit would constitute an unwarranted interference with interstate commerce. This is but another phase of the truth that such companies are not liable for the privilege tax because not doing business here. The "queer definition" in section 5 of the Act therefore either fails to enlarge the conventional meaning of doing business or by doing so illegally restricts the definition of interstate commerce.

Griffith, J., concurs in the foregoing dissent. *Page 338