269 S.W. 63 | Ark. | 1925
The tax involved in this case is not a property tax, but only a franchise tax. 19 Cyc. 1456, 1463, and cases cited;
2. It is invalid because violation of Amendment No. 14, supra, in that it deprives the plaintiff of the equal protection of the laws, by increasing the rate of taxation upon foreign corporations having no par-value stock, without a similar increase as to domestic corporation, and by taxing the plaintiff at a higher rate than is applied to bother corporations, domestic and foreign, not having non-par-value Stock, and by taxing plaintiff at a higher rate than is applied to other corporations domestic and foreign, not having non-par-value stock and by taxing plaintiff at a higher rate than is applied to other corporations having non-par-value stock divided into smaller shares.
3. Foreign corporation's with non-par stock could be taxed without the act 367.
The General Assembly of 1923 enacted a statute (General Acts 1923, p. 190) authorizing the formation or reorganization or merger of corporations with shares of stock without nominal or par value. Section 8 of that *618 statute provides that the annual franchise tax on a corporation having shares without nominal or par value "shall be treated and considered as having and being of the value actually received by the corporation for the issuance of such shares." Later, during the same session of the General Assembly, another statute was enacted (Acts 1923, p. 317), which prescribed a schedule of fees for filing articles of incorporation and also a schedule of franchise taxes, and one of the sections of that statute, after referring to the other statute just referred to, relating to corporations operating thereunder, provided that "for the purpose of the taxes or fees prescribed by law to be paid on the filing of any certificate or other paper relating to corporations and of franchise taxes prescribed by law be paid by corporations to the State of Arkansas, but for no other purpose, such shares shall be taken to be of the par value of twenty-five dollars each."
Each of the appellees filed with the Railroad Commission, which is now the Tax Commission of the State, its annual report for the year 1923, pursuant to the statute (Crawford Moses' Digest, 9802), including, among other things, the number of shares of its subscribed and paid-up capital stock and the value of same, and the value of its property owned and used in this State, as well as the value of its property owned and used outside of the State.
Section 9804, Crawford Moses' Digest, provides that, upon the filing of a report by a corporation, the Commission "from the facts thus reported and any other facts coming to its knowledge bearing upon the question, shall determine the proportion of the authorized capital stock of the corporation represented by its property and business in this State," and shall report the same to the Auditor of State, who shall charge and certify it to the Treasurer, and that a tax of "one-tenth of one per cent. each year upon the proportion of the subscribed, issued and outstanding capital stock of the *619 corporation represented by property owned and used in business transacted in this State" shall be charged.
The act of 1923, supra, provides that the franchise Tax of corporations shall be "one-tenth of one per cent. each year upon the proportion of the subscribed, issued and outstanding capital stock of the corporation employed in Arkansas." Pursuant to these statutes, the Railroad Commission certified to the Auditor the franchise tax of each of appellee corporations for the year 1923. Appellee Margay Oil Corporation showed by its report the valuation of property owned and used in the State of Arkansas in the sum of $200,000, and the Commission in fixing the amount of its franchise tax figured the shares of capital stock at twenty-five dollars per share, in accordance with the statute, on the basis of the same proportion as the value of the property situated in Arkansas bears to the value of the entire property of the corporation. This made the tax on that corporation the sum of $2,580.42, and made the tax on the other appellee, figured on the same basis, the sum of $2,549.35.
Appellees in this suit attack the validity of the statute fixing the basis of valuation of non-par-value stock. The Commission followed the terms of the statute in fixing the amount of the tax, so the case turns on the question of the validity of the statute.
The only method by which the statutory requirement, in basing the tax upon "the proportion of the subscribed, issued and outstanding capital stock of the corporation employed in Arkansas," can be complied with is to do as the Commission did in computing the proportion upon the same ratio as the value of the property in Arkansas bears to the total value of all the property of the corporation.
Appellees attack the validity of the statute as in conflict with the Constitution of the United States and the Constitution of the State, on the ground that it constitutes a denial of due process of law by taxing the property of corporations outside of the State and in discriminating against them by prescribing a method of *620 taxation at a higher rate than is applied to other corporations, domestic and foreign, not having par-value stock, and by taxing them at a higher rate than is applied to other foreign corporations not having non-par-value stock divided into a smaller number of shares.
We are unable to perceive any theory upon which it can be claimed that the prescribed statutory method of fixing the tax constitutes an imposition of the tax on property of either of appellee corporations situated outside of the State. If it be conceded that the statute is invalid because it adopts the wrong method of taxation, it is not true that the tax imposition reaches to property outside of the State. The statute expressly provides, as we have already seen, that the fee shall be based upon the proportion of subscribed stock of the corporation employed in Arkansas. Property outside of the State is not taxed at all under this method, and is not considered except for the purpose of determining the proportion of the non-par-value stock representing the property in this State. Learned counsel for appellees cite numerous decisions of the Supreme Court of the United States establishing the rule that it is beyond the power of the State, under any guise whatever, to tax property outside of the State, or to levy franchise taxes based upon property outside of the State, or to burden interstate commerce by taxation, but those cases have no application here, for the reason, as before stated, that this statute does not purport to tax property outside of the State nor to burden interstate commerce, and does not, in fact, bring about that result. The same principle is applicable as that which seemed to control the Supreme Court of the United States in the following cases: Wallace v. Hines,
The effect of the statute is simply to provide a definite method for fixing the franchise tax, and, unless it is found that it is confiscatory in its effect, or that *621 it results in a method whereby the tax is imposed upon property outside of the State, or is a burden upon interstate commerce, it is not open to attack.
The power of the State to make reasonable classifications for purposes of regulation or of taxation has been often decided and never denied, and such classifications will not be overturned by the court if all corporations of the same class are treated alike. St. L. I. M. S. Ry. Co. v. Paul,
The State has the power to fix the method of ascertaining the value of a franchise and imposing a tax on that basis, if it is a fair and just basis.
We fail to discover any grounds for attack upon the validity of this statute, and as its terms were complied with in the imposition of the tax against each of the appellees, it follows that the decree of the chancery court restraining the State's officers from enforcing this tax was erroneous. Therefore the decree in each case is reversed, and the cause remanded for further proceedings not inconsistent with this opinion.