Mississippi State Tax Commission v. Tennessee Gas Transmission Co.

Hall, J.,

dissenting:

I respectfully dissent from the holding of the majority of this case. It is somewhat astonishing to me that the majority of the Court has written 29 pages and not one time has cited a single authority dealing specifically with the tax formula here involved. The majority concede that the application of the formula prescribed by the 1956 law results in an increase of 801 percent in one of the factors going into this formula, but dismisses this with the statement that the appellee’s franchise tax for the year 1956 is increased by only 11.83 percent, and for the year 1957 by 10.78 percent. Nowhere does the controlling opinion undertake to explain or excuse this 801 percent increase in one of the subsidiary factors going into the formula as the same works out and is applied in actual figures. As I see it, the only reason that the controlling opinion does not deal further with this unexplained and outrageously high percent in this subsidiary factor is that there is no authority to sustain it.

Instead of citing a single authority specifically in point, the majority contents itself with a lengthy quotation from a little booklet by Professor Paul J. Hartman, published in 1953, and in that quotation there is elabo*215rated only the general principle that in dealing with an apportioned capital stock franchise and its working in the total scheme of state taxation, an apportionment formula may be adopted, hut nowhere does the booklet in question undertake to justify such an apportionment formula as is prescribed by the 1956 law.

In the case of Butler Brothers v. Chas. J. McColgan as Franchise Tax Commissioner of the State of California, 315 U. S. 501, 86 L. Ed. 991, the Supreme Court of the United States was not by any means dealing with such a formula as we have before us in this case. As pointed out by Justice Douglas in his opinion in that case, “We read the statute as calling for a method of allocation which is ‘fairly calculated’ to assign to California that portion of the net income ‘reasonably attributable’ to the business done there. The test, not here challenged, which has been reflected in prior decisions of this Court, is certainly not more exacting. * * * Hence if the formula which was employed meets those standards, any constitutional question arising under the Fourteenth Amendment is at an end. ’ ’

The majority opinion cites the case of Ford Motor Co. v. Tom L. Beauchamp, Secretary of State of the State of Texas, 308 U. S. 331, 84 L. Ed. 304. That case does not deal with or in any manner approach the question which we have here. It was there said: “The exploitation by foreign corporations of intrastate opportunities under the protection and encouragement of local government offers a basis for taxation as unrestricted as that for domestic corporations. In laying a local privilege tax, the state sovereignty may place a charge upon that privilege for the protection afforded. When that charge, as here, is based upon the proportion of the capital employed in Texas, calculated by the percentage of sales which are within the state, no provision of the Federal Constitution is violated.” That case is no authority whatsoever on the question which we have here.

*216The controlling opinion also cites Memphis Natural Gas Co. v. A. H. Stone, Chairman, State Tax Commission of Mississippi, 335 U. S. 80, 92 L. ed. 1830. That case was before the United States Supreme Court on an appeal from this Court as reported in 201 Miss. 670, 29 So. 2d 268. The U. S. Supreme Court said: “A glance at the activities, named above, listed by the Supreme Court of Mississippi, shows that there is no possibility of multiple ■ taxation through the same exactions by other states. The amount of the tax is reasonable. It is properly apportioned to the investment in Mississippi.

“However, a state tax upon a corporation doing only an interstate business may be invalid under our decisions because levied (1) upon the privilege of doing-interstate business within the state, or (2) upon some local event so much a part of interstate business as to be in effect a tax upon the interstate business itself.” We have no such situation in the case now before us' as was presented by the Memphis Natural Gas case.

I readily agree with Professor Hartman that a proper apportionment formula may be adopted and used, so long as the same does not result in unjustly increasing the Mississippi tax and so long as the same does not tax in Mississippi a substantial portion of the income from other states without duplicating the same.

Mention is made in the controlling opinion of the fact that the appellee owns an interest in some Mississippi oil wells, which are not operated by it, and also the fact that it owns some compressor stations in Mississippi and four pumping stations within the state and approximately 925 miles of pipeline and a number of residences for its employees in connection with the operation of the compressor stations, but it is undisputed that .the severance tax due the state on the oil produced is paid and the ad valorem taxes on all of the tangible property, real and personal, including the pipeline is being regularly paid and there is no contention that the state is *217losing any ad valorem taxes whatsoever on these several properties.

I am unable to bring myself to the view that simply because an apportionment formula may be used is no reason whatsoever for the apparent holding that just any apportionment formula does not offend the Constitution.

Holmes, J., joins in this Dissent.