Coleman v. Trunkline Gas Co.

*288ON SUGGESTION OF ERROR

Hall, J.

Appellee owns and operates a pipe line used for the transportation of natural gas from McAllen, Texas, through the States of Louisiana, Arkansas, Mississippi, Tennessee, Kentucky, and Illinois, terminating near Tuscola, Illinois. It is operating pursuant to the Federal Statute, 15 U. S. C. A. Section 717-717w, and holds a certificate of public convenience and necessity from the Federal Power Commission. After construction of its pipe line it began the transportation of gas on October 1, 1951. It does not buy, sell, produce or distribute gas in Mississippi, and all of its operations are wholly and exclusively in interstate commerce.

By Chapter 410, pages 679-680, Laws of Mississippi of 1952, the Legislature amended Section 34, Chapter 138, Laws of 1944, so as to levy a privilege tax of $75.00 per mile on each person operating a pipe line in or through this State measuring between twenty and twenty-six inches in diameter. Appellee owns 147.21 miles of such line. On August 1,1952, the State Tax Commission made a tentative assessment against appellee in the amount *289of $11,040.75 privilege tax on the operation of said line and gave notice to appellee that said assessment would be made final within thirty days thereafter. On August 25, 1952, appellee filed its protest and objections to said assessment and on September 2, 1952, the Tax Commission denied the protest and objections and made the assessment final, adjudging, however, that all facts stated in the objections were correct. Those facts were as above stated and in addition thereto that appellee’s 1952 ad valorem taxes on said line amounted to $144,150.00, its franchise tax amounted to $4,711.50, and its state income tax, based on its net earnings in proportion to its flow of business through Mississippi, amounted to $21,477.00.

From the final order of the Tax Commission appellee appealed to the Circuit Court of Hinds County which held that the imposition of the privilege tax on purely interstate business is violative of the Commerce Clause of the Federal Constitution and therefore void. From the judgment of the Circuit Court the Attorney General, representing the State of Mississippi, appeals to this Court.

The sole question presented is whether the State may validly exact a privilege tax from a person or corporation engaged solely and exclusively in interstate business.

There can be no question that the tax here involved is strictly a privilege tax. The title to Chapter 410, Laws of 1952, is “An Act to amend Section 34, Chapter 138, Laws of 1944, so as to increase the privilege tax on pipe line companies” etc. Chapter 138, Laws of 1944, which was amended by the 1952 Act is entitled “An Act to revise the privilege tax code of Mississippi . . . and to impose privilege taxes on certain businesses in the State of Mississippi.” Section 27 of said Chapter 138 provides “There is hereby imposed and levied and shall be collected annual privilege taxes, in addition to any and all other taxes imposed by law upon the persons, firms, co-partnerships, associations or corporations, for *290the privilege of carrying on and continuing the businesses, activities, and exercising powers and rights under the laws of the State of Mississippi, which said tax shall be levied and collected as herein provided.” Then follow several sections imposing privilege taxes on various public utilities. Section 34, which was amended by the 1952 Act, imposes a privilege tax on pipe line companies. Section 35 provides “Each person required by the foregoing eight sections to pay a privilege tax for doing business in this state” shall file with the Tax Commission an application, etc.

It is clear from the foregoing that the tax with which we are dealing is purely a privilege tax levied for the privilege of doing business in this State. The broad terms of the 1944 Act taxed all pipe lines regardless of whether they are engaged in interstate or intrastate business. It is significant to observe that under the 1944 Act the Tax Commission made no effort to collect a privilege tax from pipe line companies engaged exclusively in interstate business. The 1944 Act is almost an exact rescript of Section 163, Chapter 88, Laws of 1930, under which the State levied a privilege tax upon the interstate pipe line operations of Interstate Natural Gas Company, Inc. The enforcement of that levy was enjoined by the District Court of the United States from which action the Tax Commission appealed to the Supreme Court of the United States, and in a very short opinion that Court held that the tax is invalid as a burden upon interstate commerce. See State Tax Commission v. Interstate Natural Gas Company, Inc., 284 U. S. 41, 76 L. Ed. 156, 52 S. Ct. 62. In view of that decision it is readily understandable why the State Tax Commission made no effort to tax interstate pipe line companies under the 1944 Act.

In an apparent effort to circumvent the effect of the numerous decisions of the United States Supreme Court which have condemned such taxes, the 1952 Legislature *291enacted the aforesaid Chapter 410 which again levied a privilege tax “upon each person operating a pipe line in or through this state or engaged in transporting in or through this state crude oil, liquid petroleum products, and natural or artificial gas through pipes or conduits” but the Act went further and stated that this tax is “for the privilege of exercising or enjoying such right and power in this state, and for the privilege of enjoying and receiving the benefit and protection of the government and laws of this state.” The 1952 Act also defined the term “pipe line” as applying “to both interstate and intrastate trunk lines. ’ ’ Examining the 1930 law it appears that it applied to both interstate and intrastate lines without specifically mentioning both and the tax was levied for the privilege of exercising or enjoying the right and power of operating pipe lines in or through this State. The only thing added by the 1952 law was a statement that the tax is “for the privilege of enjoying and receiving the benefit and protection of the government and laws of this State.”

It must be remembered that the protest avers and the order of the Tax Commission finds as a fact that appellee herein is paying to the State a franchise tax of $4,711.50. That tax is imposed by Section 9314, Code of 1942, in the amount of $1.50 on each $1,000.00 or fraction thereof of the value of the capital used, invested or employed within this State, which section specifically states “It being the purpose of this section to require the payment of a tax by all organizations not organized under the laws of this State, measured by the amount of capital or its equivalent, for which such organisation receives the benefit ancl protection of the government and Imos of this State.” (Emphasis supplied.) It is significant to note that the franchise tax is levied solely for the privilege of receiving the benefit and protection of the government and laws of this State and that Chapter 410, Laws of 1952, is likewise for the privilege of *292“enjoying and receiving the benefit and protection of the government and laws of this State.” The only difference between the 1952 Act and the law imposing a franchise tax is that the 1952 Act adds the word “enjoying.” By payment of the franchise tax the appellee has, in effect, purchased the right to receive the benefit and protection of the government and laws of this State. The tax sought to be imposed by the 1952 law is for identically the same privilege and does not confer upon appellee a single right or benefit which it has not already obtained by the payment of its franchise tax, its ad valorem tax and its income tax on its earnings in proportion to its investment in and its flow of business through Mississippi. Payment of the franchise tax conferred upon appellee the right to receive from the State the protection of its local activities in maintaining, keeping in repair, and in manning the facilities of its system through the State, the right to acquire rights of way by eminent domain or private purchase, protection by the State against acts of vandalism, and, in fact, every other right which it enjoys.

In McGoldrick v. Berwind-White Coal Mining Co., 309 U. S. 33, 84 L. Ed. 565, 60 S. Ct. 388, 128 A. L. R. 876, numerous types of state taxation are discussed, some of which are held not to violate the Commerce Clause of the Constitution and some of which are held to be in direct violation thereof. In the latter class are privilege taxes such as are sought to be imposed by our House Bill No. 34. In discussing these taxes the Court said: “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 . . .” (Emphasis supplied.)

*293In the case of Spector Motor Service v. O’Connor, 340 U. S. 602, 95 L. Ed. 573, 71 S. Ct. 508, it was said: “This Court heretofore has struck down, under the Commerce Clause, state taxes upon the privilege of carrying on a business that was exclusively interstate in character. The constitutional infirmity of such a tax persists no matter how fairly it is ^apportioned to business done within the state. ... In this field there is not only reason but long-established precedent for keeping the federal privilege of carrying on exclusively interstate commerce free from state taxation.” The privilege tax involved in that case was levied by the State of Connecticut upon interstate truck lines using the highways of that state and Spector Motor Service maintained two terminals in Connecticut where less than truck load shipments were deposited and from which shipments coming into the state were delivered locally by pickup trucks, which same facilities were used in gathering freight for shipment to points outside the state. In the maintenance and operation of these purely local facilities the motor line necessarily kept a number of its employees within the state at all times and used the highways of the state in all of its operations and of course had the police protection of the state against acts of vandalism and the like. The Court specifically stated: “The tax does not discriminate between interstate and intrastate commerce. Neither the amount of the tax nor its computation need be considered by us in view of our disposition of the case. The objection to its validity does not rest on a claim that it places an unduly heavy burden on interstate commerce in return for protection given by the State. The tax is not levied as compensation for use of highways or collected in lieu of an ad valorem property tax.” Notwithstanding all these affirmative declarations in the opinion of the Court, the Connecticut tax was struck down as being in violation of the Commerce Clause.

*294The Spector case was cited with approval in the more recent case of Memphis Steam Laundry Cleaner, Inc. v. Stone, 342 U. S. 389, 96 L. Ed. 436, 72 S. Ct. 424, wherein the Supreme Court of the United States struck down a privilege tax imposed by Mississippi on the business of soliciting and picking up laundry and dry cleaning in this State which was carried by truck outside the State to the City of Memphis, Tennessee, for processing and then returned and delivered to customers within this State. There the Memphis concern was using the highways of Mississippi, sending its employees and trucks into this State, obtaining and carrying on business in this State, and enjoying and receiving the benefit and protection of the government and laws of this State, but nevertheless the Court said: “The Commerce Clause created the nation-wide area of free trade essential to the country’s economic welfare by removing state lines as impediments to intercourse between the states. The tax imposed in this case made the Mississippi state line into a local obstruction to the flow of interstate commerce that cannot stand under the Commerce Clause.”

All of the above authorities are recent decisions of the Supreme Court of the United States. That Court has held unqualifiedly that a state privilege tax upon purely interstate operations is a direct violation of the Commerce Clause of the Federal Constitution and cannot stand. Following those decisions we hold that the tax here in question on purely interstate business falls outside the field of legitimate state taxation and that consequently the suggestion of error should be sustained and the opinion rendered herein on November 24, 1952 withdrawn.

We find nothing in the authorities relied upon by appellant which would lead to a different conclusion. Stone v. Interstate Natural Gas Co., 103 F. 2d 544, involved a franchise tax and not a privilege tax. Stone v. Memphis Natural Gas Company, 335 U. S. 80, 92 L. Ed. *2951832, 68 S. Ct. 1475, likewise involved a franchise tax and not a privilege tax. Appellee does not question the right of Mississippi to impose a franchise tax upon it. It is paying its franchise tax, its income tax and its ad valorem tax. Interstate Oil Pipe Line Company v. Stone, 337 U. S. 662, 93 L. Ed. 1613, 69 S. Ct. 1264, cited by appellee, involved only the imposition of a privilege tax upon pipe lines engaged exclusively in intrastate business, that is to say, pipe lines running from oil fields within this State to loading racks adjacent to railroads within this State, and the tax was not in any manner sought to be imposed upon any interstate operations.

We do not attach any significance to the fact that the privilege tax code of this S tate also levies privilege taxes upon railroad companies, telephone and telegraph companies, power lines and express companies. All such companies are engaged in both interstate and intrastate business and their operations are so interwoven that it would be utterly impossible to separate the interstate from the intrastate activities of these companies.

Suggestion of error sustained, former opinion withdrawn, and cause affirmed.

McGehee, G. J., and Roberds, Holmes and Lotterhos, JJ., concur.