103 So. 773 | Miss. | 1925
Lead Opinion
The demurrer to the first count of the declaration challenged the constitutionality of chapter 129, Laws of 1924, on the ground that the privilege tax sought to be imposed thereby on citizens of the state of Mississippi for ownership of stock in foreign corporations is in effect a property tax, and consequently violates the uniformity clause of section 112 of the Constitution of the state.
Section 112 of the Constitution of 1890 reads as follows: "Taxation shall be uniform and equal throughout the state. Property shall be taxed in proportion to its value. The legislature may, however, impose a tax per capita upon such domestic animals as from their nature and habits are destructive of other property. Property shall be assessed for taxes under general laws, and by uniform rules, according to its true value. But the legislature may provide for a special mode of valuation and assessment for railroads, and railroad and other corporate property, or for particular species of property belonging to persons, corporations, or associations not situated wholly in one county. But all such property shall be assessed at its true value, and no county shall be denied the right to levy county and special taxes upon such assessment *703 as in other cases of property situated and assessed in the county."
The provisions of section 1, 2, and 3 of chapter 129, Laws of 1924, are, respectively, as follows:
"Section 1. That a privilege tax of one-half of one percentum upon the right of residents of Mississippi to own each and every share of the capital stock of nonresident corporations, stock companies, associations or trust estates, organized and conducting business for profit is hereby imposed and assessed; the said privilege tax to be collected at the time and in the manner that other privilege taxes are collected, to be computed upon a basis of the actual market value of said stock at the time said shares shall be returned for assessment under the law; provided, that in each and every case the par value of said stock shall be taken as prima-facie evidence of the actual value thereof; and where said stock has no par value, then said stock shall prima facie for-the purpose of assessment be valued at one hundred dollars per share.
"Sec. 2. That said shares of the capital stock of said nonresident corporations, stock companies, associations or trust estates, organized and conducting business for profit, owned by resident citizens of the state of Mississippi, be and the same is hereby exempted from ad valorem taxation in the state; the said privilege tax imposed by section 1 of this act being in lieu ofad valorem taxation.
"Sec. 3. That whenever any owner of said capital stock of said nonresident corporations, stock companies, associations or trust estates, organized and conducting business for profit shall fail to return said shares of capital stock for assessment of said privilege tax, the said owner shall forfeit to the state the sum of twenty-five dollars per share of said stock owned as a penalty for said failure, for each year he fails to return said stock for taxation."
While the act under review denominates the tax imposed *704
as a privilege tax on the right of residents of Mississippi to own shares of the capital stock of nonresident corporations, it cannot be doubted that the tax exacted is not an excise or privilege tax, and that it operates, and can only operate, as a tax on property. In the case of Thompson v. Kreutzer,
"In a strict legal sense, `property' (from the Latin wordproprius, meaning belonging to one; one's own) is synonymous with the `right of ownership' and means one's exclusive right of possessing, enjoying, and disposing of a thing. . . . In order that a thing may be owned, some one must, of course, have a right to the ownership thereof. A tax on a thing is a tax on all its essential attributes; and a tax on an essential attribute of a thing is a tax on the thing itself. So that, a tax on a thing owned is necessarily a tax on the right of ownership thereof; and a tax on the right of ownership of a thing is necessarily a tax on the thing itself. No definition of property can be framed which does not include the right of ownership. Consequently, no tax can be imposed on the right of ownership which is not also a tax on property."
To the same effect is the holding of the court in the case ofThompson v. McLeod,
The second count of the declaration seeks to collect delinquentad valorem taxes for the previous year, the *705 same having been assessed against the appellee as an additional assessment. In support of the action of the court below in sustaining the demurrer to this count, the appellee contends that his shares of stock in the Lumber-Mineral Company "were not subject to assessment for an ad valorem tax, because all the property of this foreign corporation, whether real or personal, was situated in the state of Mississippi, assessed for taxation as the property of other persons, and taxes paid thereon in an amount in the aggregate equal to its capital stock." The pleadings, however, do not present that state of facts, and the question as limited and presented by counsel for the appellee does not arise. The declaration avers the ownership of the shares of stock of a foreign corporation by the appellee, the failure of the appellee to return these shares of stock for assessment, the assessment thereof by the sheriff and tax collector as an additional assessment, and the failure and refusal of the appellee to pay the taxes so assessed, and then avers that the defendant, appellee, "asserts" that all the tangible property of the corporation is located and taxed in this state. This mere recital of an alleged claim or defense of the appellee was mere surplusage and wholly immaterial, and is not an averment of the existence of a fact which is admitted by the demurrer. A demurrer only admits facts that are well pleaded, and does not admit mere recitals of conclusions, either of fact or of law. Upon the record now before us, there is no showing that all or any part of the tangible property of this corporation is located or taxed in this state, and consequently the questions of whether or not shares of stock of a foreign corporation owned by a resident of this state are exempted or rendered immune from taxation, by reason of the fact that the tangible property of the corporation is located and taxed in this state, or whether or not, in fixing the valuation of such stock for purposes of taxation, there may be deducted from the real value of the stock the aggregate value of such tangible property, are not presented for decision, *706 and upon those questions we express no opinion whatever. The only question presented for decision by the averments of this declaration and the admissions of the demurrer is whether or not, under the Constitution and statutes of this state, the shares of stock in a foreign corporation are in any event, taxable in the hands of a resident holder and owner.
In the consideration of this question, it may be well to state certain general principles which appear to be established by authority. It is well settled that a state has the power to tax shares of stock of a foreign corporation which are owned by residents of the state. In 37 Cyc. 864, the rule is announced in the following language:
"Each state has the right and power to tax its own resident citizens on shares of stock in foreign corporations owned and held by them, the stock having its situs at the place of the owner's domicile, and this right is not affected by the fact that the stockholder may have been taxed upon the same stock in another state. This rule also applies even where the rule in regard to domestic corporations is that the corporation shall be taxed on its capital or property and that this shall relieve the stockholders from taxation on their shares; and regardless of whether the foreign corporation pays taxes on its capital or property in the foreign state or not."
In 26 R.C.L., section 129, p. 158, the doctrine is announced that — "There is a clear distinction between the capital stock of a corporation and its shares of stock in the hands of individual stockholders, so that the taxation of the one property is not the taxation of the other, and it is well settled that the property of shareholders in their shares, and the property of the corporation in its capital stock, are distinct property interests, and where that is the clearly expressed legislative intent both may be taxed. . . . It is equally well settled that a tax on the property of a corporation and a tax on the shares of stock in the hands of the individual stockholders, though in a sense double taxation, is not unconstitutional on that account." *707
To the same effect are the cases Shelby County v. UnionBank,
In 26 R.C.L., section 155, p. 184, it is said: "An individual may be taxed in the state in which he lives on shares of stock in either domestic or foreign corporations, and a state may tax shares of stock in domestic corporations owned by nonresidents. . . . A stockholder has no constitutional right to a deduction from the valuation of the shares in his hands for the purposes of taxation on account of real estate in which part of the capital of the corporation is invested and which is taxed in the city or town in which it is situated. . . . It is well settled that the shareholder is not constitutionally entitled to a deduction for a proportionate amount of the capital of the corporation that is invested in the United States bonds, state bonds or other securities which are themselves exempt from taxation."
Again, in section 254 of 26 R.C.L., it is said: "So, also, the shares of stock are taxable to the owners even if the capital stock of the corporation is exempt from taxation by law. In fact, a general statute requiring the taxation of all property within the state will be construed as requiring the taxation of shares in foreign corporations owned by residents of the state without deduction on account of the property of the corporation located and taxed outside the state even when the constitution of the state expressly prohibits double taxation or when the property of the corporation is located and taxed within the state."
An exemption from taxation will never be presumed, and the burden is on a claimant to establish clearly his right to an exemption. In the case of Morris Ice Co. v. *708 Adams,
While in Cooley on Taxation, vol. 2 (4 Ed.), p. 1407, the doctrine is announced that: "If an exemption is found to exist, it must not be enlarged by construction, since the reasonable presumption is that the state has granted in express terms all it intended to grant at all, and that unless the privilege is limited to the very terms of the statute the favor would be extended beyond what was meant."
There is in our statutory law no definite scheme provided for returning for assessment the shares of stock of a foreign corporation, but section 4267, Code of 1906, section 6901, Hemingway's Code, provides a detailed scheme or method of fixing the taxable value of the stock of domestic corporations, and for returning the same for assessment, and provides that the capital stock of such company or corporation shall be assessed to it for taxation to the extent of the full amount of the value thereof, less the value of its assessed and taxed real estate. In the case of State v. Simmons,
Turning now to the general statutes with reference to taxation and exemptions from taxation, we find that section 4251, Code of 1906, section 6878, Hemingway's Code, which declares the general law and policy of the state in regard to exemption from taxation, provides that "the following property, and no other, shall be exempt from taxation, to-wit." Then follows a detailed list of exemptions which does not include shares of stock in a foreign corporation. This section is an express declaration that all property in the state shall be taxed except that which is specifically exempted. The same result might have been accomplished by providing that "all property in this state shall be taxed, except the following," and then inserting the enumerated list of property to be exempted.
Section 4257, Code of 1906, section 6888, Hemingway's Code, declares that — "All taxable property brought into the state or acquired or held by any person before the *710 first day of February shall be assessed, and taxes thereon paid for the current year."
Chapter 101, Laws of 1916, section 6904, Hemingway's Code, provides a form for printed lists which the board of supervisors is required to furnish the tax assessors for the use of the taxpayers in returning their property for assessment, and one of the items of property which this list expressly requires the taxpayer to return for taxation is the "value of all shares or certificates of stock in any corporation, stock company or association domiciled outside of this state."
Section 4272, Code of 1906, section 6906, Hemingway's Code, requires that the tax list of every taxpayer shall be made out on one of these printed lists to be furnished by the assessor, and that this list shall be filled in ink, and the oath appended thereto executed by the taxpayer.
Sections 4264 and 4271, Code of 1906, sections 6898 and 6905, Hemingway's Code, also require that the printed list, furnished the taxpayer, and containing blanks for the valuation of property, shall have appended thereto an oath, to be executed by the taxpayer, that the list as returned is a just and true account of all the personal property owned by the taxpayer which is subject to taxation.
In addition to the foregoing provisions specifically designating shares of stock in a foreign corporation as taxable property, the list which the tax assessor is required by section 6904, Hemingway's Code, to furnish the taxpayer, contains an omnibus clause for the "value of all other personal property owned by the party assessed subject to taxation not specifically mentioned."
Chapter 134 of the Laws of 1918 authorized and directed the state tax commission to prescribe the form of tax lists to be used in the assessment of property for state and county purposes, and requires the board of supervisors of each county to furnish the assessor with printed lists for the assessment of property in accordance with the form of tax lists prepared and prescribed *711 by the state tax commission; and in pursuance of the authority of this act, the tax commission readopted the form of tax list prescribed by section 6904, Hemingway's Code, in so far as it provided for the listing and taxation of the "value of all shares or certificates of stock in any corporation, stock company or association, domiciled outside of this state."
By an examination of the constitutional provision that taxation shall be uniform and equal throughout the state, and property shall be taxed in proportion to its value, and shall be assessed for taxes under general laws, and by uniform rules, according to its true value, and the statutes carrying into effect these provisions, it will be noted that section 4251, Code of 1906, section 6878, Hemingway's Code, expressly provides that all property within the state shall be taxed, except such as may be expressly exempted. That shares of stock of a corporation are a species of personal property is self-evident, and in listing in this statute property that shall be exempt from taxation, shares of stock in a foreign corporation are not included, and there is no express exemption of such stock in any other or later statute, and none is claimed to exist. On the contrary, section 6904 of Hemingway's Code, which lists the items of taxable property and expressly includes therein shares of stock of a foreign corporation, which list in so far as it affects such stock was readopted and promulgated by the state tax commission under express legislative authority and command, is an express legislative declaration in clear and unambiguous terms that such stock is taxable in the hands of the resident owner thereof, and it would seem that an application of these various statutory provisions should end the inquiry.
However, the question of the taxation by a state of the shares of stock of foreign corporations generally, and under statutory provisions analogous to those of this state, has been often considered by the courts of the several states, as well as the supreme court of the United *712 States, and an analysis and application of some of these decisions will be helpful in the consideration of the applicable statutes of this state.
In the case of State v. Kidd,
"By subjecting them the state does not infringe its general policy of avoiding double taxation, for the property *713 is not doubly taxed by its own laws; and it is not forced, by comity or otherwise, to conform to laws elsewhere in order to shelter property from burdens which, but for such foreign laws, would not have come upon it. That ownership of shares in capital stock is distinct from ownership of capital stock itself is generally if not everywhere recognized. Such shares are property, and as such, belong in, and are taxable in the state of the owner's residence, irrespective of legislation in another state."
The above case was appealed to the supreme court of the United States, and that court held that "the equal protection of the laws is not denied by" the above-mentioned sections of the Alabama Code, "for the taxation of railroad stock, because of the exemption of stock in domestic railroads and in others that list substantially all their property for taxation;" the court saying:
"We see nothing to prevent a state from taxing stock in some domestic corporations and leaving stock in others untaxed on the ground that it taxes the property and franchises of the latter to an amount that imposes indirectly a proportional burden on the stock. . . .
"We say that the state in taxing stock may take into account the fact that the property and franchises of the corporation are untaxed, whereas in other cases they are taxed; and we say untaxed, because they are not taxed by the state in question. The real grievance in a case like the present is that, more than probably, they are taxed elsewhere. But with that the state of Alabama is not concerned. No doubt it would be a great advantage to the country and to the individual states if principles of taxation could be agreed upon which did not conflict with each other, and a common scheme could be adopted by which taxation of substantially the same property in two jurisdictions could be avoided. But the Constitution of the United States does not go so far. [Citing authorities.] The state of Alabama is not bound to make its laws harmonize in principle with those of other *714
states. If property is untaxed by its laws, then for the purpose of its laws the property is not taxed at all." Kidd v.Alabama,
In the cases of Georgia R. Banking Co. v. Wright,
In the case of Georgia R. Banking Co. v. Wright, supra, the Georgia court said: "The Constitution of this state imperatively requires that all property of every nature whatsoever within the territorial limits of this state shall be subjected to taxation, except that which the Constitution in terms declares the General Assembly may in their discretion exempt from taxation."
Section 4251 of the Mississippi Code of 1906, section 6878, Hemingway's Code, in effect, declares that all property of every nature whatsoever within the territorial limits of this state shall be subjected to taxation, except that which is specifically exempted by statute. In the above-case the Georgia court further says that — "After the passage of the act of 1888, no share of stock in a domestic corporation was taxable in the hands of a shareholder; for every domestic corporation was required by law to return its property either to the Comptroller General or the tax receiver of the county."
This statutory provision of the state of Georgia is in exact accord with the construction which this court, in the case ofState v. Simmons, supra, placed upon our *715 statutes providing for the taxation and assessment of shares of stock of domestic corporations. In the Banking Company case,supra, the Georgia court, in holding that under these constitutional and statutory provisions of that state, the shares of stock in a foreign corporation were taxable, said:
"The general assembly cannot make it a subject of taxation at an arbitrary value; but if it is a thing which can be brought and sold upon the market, it is within the authority of the lawmaking power to declare that for the purposes of taxation it shall be treated in the hands of the owner as of the value which it would command in the market. When that which gives it value has been taxed, the General Assembly is not required, under the Constitution, to tax it again through the medium of the shareholder. But it may do so; and when the tax levied is uniform on all shareholders of the same class, the constitutional provision as to uniformity is complied with. A shareholder in a domestic corporation whose property is taxed in the hands of the corporation by the state is not in the same class with the shareholder in a foreign corporation whose property is not taxed and cannot be taxed by the taxing authority of the state."
The analogy between the statutes of this state affecting the taxation of corporate stock and those of the state of Georgia is more apparent when we consider the language of the supreme court of the United States in the case of Wright v. L. N.R.R.Co.,
"The natural inference from the foregoing language is that the Comptroller General was bound to collect this tax. . . . The argument against the tax is that the Constitution of Georgia is satisfied if all the lands and goods in the state are taxed once, and that the appearance of the same capital in two forms technically distinct ought not to be laid hold of as an excuse for two taxes. It is admitted that no such double taxation is enforced with regard to corporations, of which the property is taxed, within the state, and it hardly would be contended that this wise moderation is unconstitutional. . . . But, from the point of view of the taxpayer, it does not matter whether all of his double taxation is done in one state or half in one and half in another. He suffers the same injustice. . . .
"The difficulty with this argument is that the Georgia Constitution requires the taxation of all property subject to be taxed in Georgia. And while it may be that the constitutional requirement is sufficiently complied with when the land and chattels which give value to the stock pay a tax, without another tax on the stock, there is much more difficulty in saying that the words are satisfied if stock is left untaxed when the land and chattels cannot be reached. . . .
"Putting the case at the lowest, the above cited section of the Constitution was adopted in the interest of the state as a tax collector, and authorizes, if it does not require, a tax on the stock. In pursuance of the Constitution, the law of 1898, under which this tax is demanded, contains the following: `In addition to the questions *717 now propounded to taxpayers by the tax receivers, questions shall be framed by the Comptroller General to reach all property upon which a tax is imposed by this act, and especially the following questions: . . . Thirtieth. How many shares of stock did you own on the day fixed for the return of property for taxation issued by corporations located without this state? Thirty-first. What was the gross nominal value thereof? Thirty-second. What was the fair market value thereof?' Laws of 1898, No. 150, section 16, p. 36. This plainly contemplates that the mandate of the Constitution shall be carried out."
It will be noted that the three questions quoted above, which the Georgia act requires the taxpayer to answer, are practically identical with the provision of our statute requiring the taxpayer to disclose, list, and value for taxation the shares of stock of foreign corporations owned by him. In addition to this provision of our statute requiring the taxpayer to list stock in a foreign corporation for taxation, other provisions already quoted herein require the taxation of all property within the state, other than property specifically exempt, which does not include such stock, and it would seem, as said by United States supreme court, in the Wright case, supra, that legislation could not make the requirement to tax more explicit.
In the case of Lee v. Sturges,
"The exemption from taxation of investments in stocks, provided by the statute, applies only to shares of those corporations which are required to return their capital and property for taxation in the state. Jones v. Davis,
In the case of Bacon v. Board of State Tax Commissioners,
Many cases from other states might be cited which have held that shares of stock in foreign corporations are taxable in the hands of resident owners, but most of these cases involve the construction of statutes of varying provisions, and consequently are only valuable in so far as *719 they discuss the general principles involved in the taxation of corporate stock, and for purposes of comparison.
Chapter 129 of the Laws of 1924, which we have herein held to be unconstitutional and void, is the first attempt of the legislature of this state to declare an exemption in favor of stock in a foreign corporation, and it is significant to note that section 2 of this act expressly declares that shares of stock of foreign corporations owned by residents of this state are thereby exempted from ad valorem taxation, and that the so-called privilege tax attempted to be imposed by section 1 of the act shall be in lieu of ad valorem taxation. Since this act is void, it may be that it would not properly be considered a legislative construction of prior statutes affecting the taxation of such stock; but, if so, it is at least a very strong indication of legislative thought on the subject. The act of 1924 having been declared void, all existing laws affected, or attempted to be repealed, thereby, are in full force and effect, and we are of the opinion that they clearly and unequivocally impose taxes on the shares of stock of a foreign corporation owned by residents of this state.
The second count of the declaration in the case at bar simply charged that on February 1, 1923, the defendant was the owner of ten shares of the capital stock of a foreign corporation, which was of the par and actual value of one hundred dollars per share; that these shares of stock were not assessed for the year 1923, as required by law; that the plaintiff as sheriff and tax collector had assessed the ten shares of stock against the defendant at its actual value as an additional assessment; that the taxes thereon calculated at the rate fixed by the state and county for the year 1923 were due; and that the defendant neglected and refused to pay this tax. The third ground of the demurrer challenged the sufficiency of these averments of the declaration, and it follows from the views herein expressed that we are of the opinion that this demurrer should have been overruled. The judgment of the court below sustaining the demurrer to *720 this count will therefore be reversed, and the cause remanded for trial on the second count.
Affirmed in part, and reversed in part.
Dissenting Opinion
I cannot agree with the view reached by my brethren as to the second count of the declaration in this case, but I hardly think it worth while to set out my reasons at length, and shall be content to say that it has never been, and is not now, the policy of our laws to tax the shares of stock of any corporation in the hands of a shareholder, and this, too, whether the corporation be foreign or domestic, whether domiciled here or in another state.The Simmons case,
The broad and just principle seems to have been laid down, especially in the Simmons case, that unless the legislature expressly taxes the shares in the hands of the shareholder, then they are not taxable, because to tax the shares in the hands of the shareholder would be to twice tax the capital stock or the property already taxed, which is unfair and unjust; and while the legislature has the power to double tax, it must clearly express its purpose to do so, otherwise the courts will seek a reason to defeat the double taxation. The shares of stock being merely the evidence of the ownership of the capital stock or the property of the corporation, it would be taxing the corporation twice if the shares are taxed as well as the capital stock or the corporate property.
No one doubts the authority of the state to double-tax corporations, and it has been held that taxing shares in a foreign corporation held by a citizen in another state would not be double taxation in the strict sense, because the taxation of the corporate property in the foreign *721 state would not be taxation in the same jurisdiction where the share is taxed in the hands of the shareholder. But the point I contend for is that it never has been and is not now the policy of our state to tax both the share in the hands of the shareholder and the capital stock or the property of the corporation, because to do so would be to tax the same property twice; it being presumed that the capital stock or the property is taxed where located or domiciled.
I do not think the legislature of this state has intended to tax the shares in the hands of the shareholder, because there is no statute for that express purpose, and since the rule in the Simmons case has been the guide in this state for several decades, and the legislature is presumed to have known it, it is my opinion the statutes relied upon by the majority opinion as authority for taxing the shares in the hands of the shareholders are not sufficient, and do not plainly and expressly authorize the taxation of shares in the hands of a shareholder, of either a foreign or domestic corporation.
If the legislature has expressly imposed the tax on the shares of stock, as now held by the majority opinion, and the tax is enforced, no revenue would be thereby obtained by the state; and, on the other hand, the securities in foreign corporations, held by citizens in this state, would be driven from our state, either by the holder disposing of his stock because it would be unprofitable to keep it, or he would move himself out of the state.
For illustration: If a citizen owns stock in a foreign corporation, for instance, a railroad corporation, and he is required to pay ad valorem taxes on the shares of stock, he would find it unprofitable to hold the stock, because the average tax levy in the municipalities of our state is six per cent., and the average dividends that the holder would receive upon his stock would be about six per cent.; therefore the investment would be wholly unprofitable and the stock would be disposed of. Foreign securities would thereby become undesirable. Consequently in a *722 very short time there would be no holder of shares in a foreign corporation left in the state, for the reason that the shareholder would either leave the state with his property or else sell the shares of stock to persons in some other state.
It would therefore result that the state would get no revenue from this character of tax, and the citizen who desired to invest his money in the stock of a foreign corporation, draw his dividends, and spend them in this state, would move to some other state so that he might be free to invest his capital in such profitable dividend-paying investments. In no event could the state profit by such a tax, even though the holder of shares in a foreign corporation should once render them for assessment.
Therefore, I am unwilling to charge the legislature with the intent to impose such taxation. They have not done so by any express statute, and the majority opinion must rely upon different statutes, pieced together, with the help of the state tax commission, all of which is added together, to impose the taxation. I think the majority is not warranted, by the statutes now in force, in holding that this character of property is assessable for ad valorem taxation. There is a plausible argument to support the views of the majority on this question, but I cannot bring myself to believe the legislature intended to impose the tax on shares in the hands of the shareholder, as the majority opinion maintains. A study of the authorities cited, by those who are interested enough to do so, will, in my judgment, result in forcing the conclusion that the law has always been against the principle of taxing property twice, or I may say, generally speaking, double taxation. And I shall follow the rule against such unjust taxation until the legislature legislates expressly to the contrary.
SMITH, C.J., concurs in above dissent. *723
