This proceeding was instituted in the name of the state of Oklahoma for the purpose of subjecting certain omitted property of the Carter Oil Company to taxation on an ad valorem basis for the fiscal year 1926-27. The property involved was omitted by the company in its tax returns, but was added to the tax rolls by the county assessor. The company filed its objections with the board of equalization.
The property involved was:
One warehouse and its contents, consisting of material, equipment and supplies concentrated therein for the purpose of being used in and around the producing oil wells of the Carter Oil Company in Carter county, Okla.; twenty lease houses erected and maintained by the defendant for the sole purpose of housing its employees employed upon various producing leases in Carter county, Okla.; one ice plant manufacturing and furnishing ice free to the company's employees; one oil house for storing oil used in automobiles and machinery used in connection with the operation of the company's producing oil leases; one hospital maintained for furnishing medical aid and attention, and especially first aid to the company's employees who might be injured in the performance of their duties on producing leases.
On July 19, 1926, a hearing was had before the board of equalization of Carter county. On August 31, 1926, the said board overruled the objection of the Carter Oil Company to the assessment, and thereafter the company perfected an appeal to the district court. The taxes upon the assessment were paid under protest and suits instituted against the county treasurer of Carter county to recover therefor as each half of the taxes fell due. These two suits against the county treasurer were consolidated with the action on appeal from the board of equalization. The trial court rendered judgment on March 19, 1930, wherein it was recited:
"The court finds that the property above referred to and described in the cause of action aforesaid, to wit, warehouses, houses, warehouse equipment, material and all other property described in the seventh cause of action, is not subject to ad valorem taxation under the laws of the state of Oklahoma, by reason of the terms of the gross revenue law, said property being used or to be used in the production of oil and gas by the said Carter Oil Company.
Judgment was rendered in favor of the Carter Oil Company against the county treasurer of Carter county in the sum of $2,298.96, the amount of taxes paid under protest. This appeal is from that judgment.
Appellant states the issue involved under the single proposition: "The judgment of the court is contrary to law."
Appellee says:
"There is but one issue involved in this cause, and that is as follows: Is the property above described relieved of the burden of ad valorem taxation by reason of the provisions of the Gross Revenue Law as found in section 9814, C. O. S. for 1921?"
Section 9814, C. O. S. 1921, after providing for a statement to the State Auditor by every person, firm, association, and corporation engaged in mining or production of asphalt or ores bearing lead, zinc, jack, gold, silver, or copper, or of petroleum or other crude oil or other mineral oil or of natural gas, requires the payment of tax on such products based upon the gross value thereof, and states:
"The payment of the taxes herein imposed shall be in full and in lieu of all taxes by the state, counties, cities, towns, townships, school districts and other municipalities upon any property rights attached to or inherent in the right to said minerals, upon leases for the mining of asphalt and ores bearing lead, zinc, jack, gold, silver or copper or for petroleum or other crude oil or other mineral oil or for natural gas upon the mining rights and privileges for the minerals aforesaid belonging or appertaining to the land, upon the machinery, appliances and equipment used in and around any well producing petroleum or other crude or mineral oil or natural gas, or any mine producing asphalt, or any of the mineral ores aforesaid and actually used in the operation ofsuch well or mine; and also upon the oil, gas, asphalt or ores bearing minerals hereinbefore mentioned during the tax year in which same is produced, and upon any investment in any of the leases, rights, privileges, minerals or property hereinbefore in this paragraph mentioned or described; but any interest in the land other than that herein enumerated, and oil in storage, asphalt, and ores bearing the minerals hereinbefore named, mined, produced and on hand at the date as of which property is assessed for general and ad valorem taxation for any subsequent tax year shall be assessed and taxed as other property within the taxing *Page 101 district in which such property is situated at the time."
Thereafter within the statute is a provision made for the adjustment by the State Board of Equalization of the rate of gross production tax by increasing or diminishing the same to conform to the rate for ad valorem taxation.
The meaning of the words "used" and actually used," as contained in the statute quoted and emphasized by us, is the gravamen of this lawsuit.
Appellant contends that no such property as involved here is relieved from ad valorem taxation by reason of this statute unless the same is in present use in some operation employed to extract oil, gas, or other designated minerals from the earth. Whereas appellee contends that such property, to be exempt from ad valorem taxation, is either that used or to be used, thus extending the exemption to all property "which a producer might find necessary in its business of producing oil."
We consider, first, the item of the warehouse and its contents, consisting of material, equipment, and supplies concentrated therein for the purpose ofbeing used in and around the producing oil wells of the Carter Oil Company. This property is not in actual use, but is stored in a central location for convenience and intended for future use in the operation of leases belonging to the company and for the production of oil. This item is not exempt from ad valorem taxation. We arrive at that conclusion by the plain meaning of the statute, supra, under the terms of which the exemption is claimed (Consolidated Sch. Dist. No. 72, Carter County, v. Board of Education of City of Wilson, 113 Okla. 217,242 P. 173), and without the aid of the rule of strict construction, applicable when a special privilege or exemption from the taxing power is claimed. Cooley on Taxation (4th Ed.) vol. 2, p. 1403. However, we note a paragraph contained in the last-mentioned work at p. 1441, which reads:
"An intention to use property at some uncertain time in the future, for the purposes which will render it exempt from taxation under the law of the state, does not preclude its taxation before actually used for the purposes warranting an exemption. If the use determines the right to exemption, it is the present use and not the intended use in the future which governs."
Likewise it is to be noted that the Legislature was not content with merely stating the exemption from ad valorem taxes for all property used in and around such a well or mine, but reiterated the subject-matter and emphasized the words "actually used" as a condition precedent for the substituted gross production tax.
Supporting our conclusion is the case of Board of Co. Com'rs v. Alexander, 58 Okla. 128, 159 P. 311, wherein this court in construing this statute held that Creek county is prevented from levying and collecting an ad valorem tax on "not only the oil and gas produced, but the equipment and machinery in and around any well producing natural gas or petroleum or other mineral oil, and used in the actual operation of such producingwell." Thus showing a construction of the statute limiting, by necessary inference, the exemption of such property from ad valorem taxation to that used in the actual operation of such producing oil well.
The decision in Re Gross Production Tax of Wolverine Oil Co.,53 Okla. 24, 154 P. 362, squarely determines the issue involved in the first item herein concerning the warehouse materials, machinery, appliances, and equipment stored for future use. Therein this court, in determining the property exempted from the ad valorem tax by reason of payment of the gross production tax, held:
"The equipment and machinery referred to is confined to that used in the actual operation of producing wells, hence, does not include equipment and machinery on hand, and not so used."
In Skelton Lead Zinc Co. v. Harr, 104 Okla. 137,230 P. 691, where ad valorem tax on equipment of a lead and zinc mine was protested on the ground, among others, that it was not subject to such ad valorem tax because of its use in the production of minerals taxable under gross production levy, but where it was established that the equipment had not been used in production of such minerals for the years for which the ad valorem tax was levied, although it had previously been so used, it was held:
"* * * This mill was subject to the ad valorem tax under the general tax provisions of the state."
In that case other mines of the company were in use and no doubt the equipment of this particular mine was intended for future use; nevertheless, since it was not actually used in such mineral production, it was held to be subject to ad valorem taxes.
The case of Going, Co. Treas., v. Shaffer, 89 Okla. 46,213 P. 786, presented the question whether storage tanks some six to ten miles distant from the producing well in *Page 102 which oil was pumped as produced and from which the oil was marketed, were relieved from ad valorem taxes by reason of the payment of gross production tax on the oil. This court held:
"That the steel storage tanks and pipe lines connecting them with the receiving tanks were not exempt from the payment of the ad valorem tax under the provisions of section 9814, C. O. S. 1921."
And that:
"In order for property or equipment to be exempt from the payment of other tax under the provisions of section 9814, Comp. St. 1921, such property must be an indispensable agency in the discovery and production of the petroleum, and must be used in and around a producing well, and be actually used inthe operation of such well."
Appellee relies upon the case of Wm. M. Graham. Oil G. Co. v. Oil Well Supply Co., 128 Okla. 201, 264 P. 591, but it is not applicable, for it construes section 7464, providing a lien for labor or material upon an oil and gas lease and appliances used in the operation for oil. There it was held the term "furnish," as used in section 7464, C. O. S. 1921, means to supply a thing for use in the accomplishment of a particular purpose; and the term "used" means the employment of a thing for the accomplishment of a particular purpose. That case did not turn upon the statute now under consideration, nor did it consider such a statute wherein there were used the words "actually used."
Josey Oil Co. v. Co. Com'rs of Payne County, 107 Okla. 266,231 P. 272, relied upon by appellee, originated in an effort on the part of the taxing authorities to subject machinery and equipment employed in the operation of a producing oil lease as well as lease houses to ad valorem taxes. The trial court held the machinery and equipment not to be subject to ad valorem taxation, but held that the lease houses were so subject to taxation in that form. Thereafter the trial court vacated its judgment for the reason it was shown that the taxes had not been paid under protest. The oil company appealed and presented only the questions whether the court erred in vacating the judgment and "whether the trial court erred in holding taxable the employee's houses on plaintiff's oil lease."
This court held that the gross production tax was in lieu of any other taxes that might be levied and collected upon an ad valorem basis upon the equipment and machinery "in and around any wells producing natural gas or petroleum or other mineral oil and used in actual operation of such producing well from which a gross production tax is collected."
Thus stating the uniform rule announced in the cases heretofore cited, the court further held:
"It is clear that all of the property attempted to be taxed as set out here, except the houses, consisted of equipment and machinery used, or to be used, in the production of oil upon the leases of the Josey Oil Company."
Thus affording a contention to appellee that the rule for denial of ad valorem tax upon such machinery is based not upon that actually used, but upon that to be used. Such is not the rule, nor does the Josey Case so hold, for it will be observed that this court there complained that there was to cross-appeal by defendant in error and held that the scope of the decision was limited to the vacation of judgment and to the question of ad valorem tax upon the lease houses.
In other words, while it was clear in the Josey Case that the equipment exempted from ad valorem tax by the trial court was that used or to be used, and notwithstanding the uniformity of decisions holding that the exemption applied only to such equipment actually used as an indispensable agency, in and around such a producing well, so that such part of the equipment as was not in use, but kept for future use, would be subject to ad valorem taxation, nevertheless, in view of the fact that no cross-appeal was perfected, only the matter of taxation on the lease houses would be considered.
However, it was held in the Josey Case that:
"The question whether certain houses built by the operator of an oil lease for housing his employees are a necessary part of the equipment of a producing oil lease is one of fact to be determined by the court under the circumstances of each particular case."
And we adhere to that rule, for in some situations such houses might be dispensable agencies of a producing well or mine; for example, in the Oklahoma City oil field, where such conveniences are afforded in close proximity to the wells; but we can imagine a situation where an oil well or mine might be located in inaccessable country, and unless lease houses be provided for employees, and in event they were required to live in distant settlements and required to travel undeveloped roads or trails, *Page 103 the production of minerals would be seriously impaired.
What we have said as to the lease houses also applies to the items for the ice plant, for in certain locations ice is as indispensable as shelter. Likewise, the same conclusion applies to the item for hospital or first aid station.
The judgment as to these items and all except the first, i. e., warehouse and contents stored therein for future use, is sustainable and is sustained.
The judgment upon the first item is reversed, with directions to enter judgment thereon in favor of appellant.
HEFNER, CULLISON, SWINDALL, ANDREWS, and McNEILL, JJ., concur.
LESTER, C. J., CLARK, V. C. J., and KORNEGAY, J., dissent.