10 So. 2d 380 | Miss. | 1942
The question presented for decision in this case is whether or not the local activity of a nonresident performed in the installation, adjustment and testing of *645 certain air-conditioning systems in buildings located in this state and constituting a substantial part of the performance of the contracts for the sale of the machinery and equipment which was manufactured outside of the state by such nonresident and shipped here in interstate commerce for use in air-conditioning such buildings, is subject to the provisions of Section 57, subsections (a) and (b), and Section 247, of Chapter 20, Laws of Mississippi Extraordinary Session of 1935, and Section 2-e, Chapter 119, Laws of 1934, which seek to require the payment of certain privilege taxes and a sales tax respectively for the right to engage in such activities in this state.
Section 57, subsection (a), of Chapter 20, Laws of the Extraordinary Session of 1935, requires "each person who offers or bids to contract for a fixed price, commission, fee or wage to construct, repair, or to superintend the construction or repair of any building, highway, street, sidewalk, bridge, culvert, sewer or water system, drainage or dredging system, electric or steam railway, reservoir or dam, hydraulic or power plant, electric lighting or power system, steam heating plant or system, transmission line, pipe line, tower, dock, wharf, excavation, grading, or other improvement or structure, or any part thereof, the contract price of which exceeds the sum of three thousand dollars," to pay for and obtain from the State Tax Commission a license as a contractor, in the sum of $25, before offering or submitting any bid for such work; and subsection (b) of said Act provides that "any person who shall enter into a contract, for a fixed price, commission, fee or wage, to construct, repair or superintend the construction or repair of any of the projects named in paragraph (a) hereof, or any part thereof, the contract price of which is in excess of $3,000.00, shall, before beginning the execution of such contract, apply for, pay for and obtain, an additional license from the state tax commission, *646 computed at the rate of fifty cents (50c) for each thousand dollars or fractional part thereof, that said contract price exceeds ($3,000.00) three thousand dollars. Said license when so obtained, shall entitle the holder thereof to enter into and execute contracts within the aggregate amount covered by said license, at any place within the state for the full period of twelve months from the date thereof." Section 247 of said Act provides that "all persons liable for privilege taxes who shall fail to procure the license therefor before beginning the business for which a privilege tax is required by this act, . . . shall . . . be liable for the amount of the tax required for such business and fifty per centum thereof." And it is made the duty of the sales tax commissioner to collect such tax and the penalty in such case.
Section 2-e of Chapter 119, Laws of 1934, provides that "upon every person engaging or continuing within this state in the business of contracting, as defined in the privilege tax law of this state, and amendments thereto, there is likewise hereby levied and shall be collected a tax, on account of the business engaged in, equal to one per cent of the gross income of the business."
The York Ice Machinery Corporation, appellee herein, is a Delaware corporation having its home office and principal place of business in the city of York, State of Pennsylvania. It has not qualified to do business in the State of Mississippi as a foreign corporation; neither has it paid any privilege tax as a contractor nor the sales tax upon the total contract price of any undertaking wherein it has furnished and installed machinery and equipment for the air-conditioning of buildings in this state, and for which taxes the appellant A.H. Stone, Chairman of the State Tax Commission, contends that it is liable under the statutes above referred to in connection with certain local activities performed in the installation, adjustment and testing of an air-conditioning system in the Heidelberg Hotel at Jackson, Mississippi, *647 under a contract of August 31, 1937, at a cost of $31,300 and an additional contract of July 19, 1938, at a cost of $5,634, the installation under the first of which said contracts began on April 15, 1938, and was concluded on September 20, 1938, and under the second contract beginning on September 1, 1938, and concluding on September 30, 1938, and wherein the cost of installation amounted to twelve percent of the total contract price in the first instance and seven percent thereof in the second instance. The taxes demanded by the appellant were paid to him by the appellee under protest and this suit is for the recovery of such taxes together with similar taxes likewise paid by the appellee in connection with its contract for furnishing and installing a meat curing plant for the Board of Supervisors of Adams County at Natchez, Mississippi, at a cost of $14,100, the work of installation, adjustment and testing said plant having commenced on October 1, 1939, and being completed on January 10, 1940, and the cost of which local activity amounted to eight percent of the total contract price; and also for such taxes so paid in connection with furnishing and installing an air-conditioning system in the Walthall Hotel at Jackson, Mississippi, at a cost of $21,530, the installation, adjustment and testing of which began on May 18, 1940, and was concluded on August 3, 1940, and the cost of which was eight percent of the total contract price. The foregoing facts are alleged in the declaration by the appellee for the recovery of such taxes, and the contracts entered into between the appellee and the owners of the respective properties which were to be improved by the installation of such air-conditioning systems therein are made exhibits to the declaration and show that pursuant to a bid submitted in this state by "contractor" through one of its salesmen, and accepted here by the owner of the property to be air-conditioned, but subject to final approval at an office of the appellee in Houston, Texas, the machinery *648 and equipment was to be manufactured outside of the state, shipped to its destination in this state, and then trucked or carted from the railroad station to the building by contractor at its own expense and to be there installed by the expert engineers and other employees of contractor at the total contract price hereinbefore mentioned. The contracts disclose an undertaking on the part of contractor in each instance to perform considerable local work in connection with the proper installation, adjustment and practical testing of the system before the obligation of the purchaser arose to finally accept the machinery and equipment as a completed air-conditioning system and become bound to pay for the same under such contract. It also appears from such contracts that the plans and specifications for the installation of such systems were agreed upon and embodied in the contract prior to the manufacture of the machinery and equipment, and that the same were based upon measurements and observations made in the building by some representative of contractor prior to submitting the bid for furnishing and installing such system.
The declaration further alleges that because of the inherent nature of the contract for the sale of the machinery and equipment therein designated the assembling, installation and testing thereof at the point of destination is a highly relevant and appropriate part of the sale, that it required the services of skilled experts for the doing of such work and was essential to complete the interstate business in which the seller was engaged in making sales of air-conditioning systems, and that the seller was therefore entitled to the protection of Article I, Section VIII of the Constitution of the United States, vesting in Congress the power to regulate commerce among the several states, and that the defendant's act in making the assessment and collecting the taxes in question from the plaintiff violated the said commerce clause of the Federal Constitution. The trial court overruled *649 the demurrer of the State Tax Commissioner, who, declining to plead further, suffered judgment to be entered against him for the sum of $925.70 in taxes involved, and prosecutes this appeal.
In view of the numerous projects mentioned in Section 57, subsection (a), of the statute hereinbefore quoted from, the construction or repair of which involves the use of materials and equipment fabricated or manufactured outside of the state and the performance of local activity in the state in connection with such construction or repair, and in view of the necessity for the exercise of the local taxing power in order to meet the increased burdens of government and to the end that all who enjoy the protection of the local government should pay their fair portion of the taxes needed for its support, the principle of law now presented for consideration becomes of greater importance with each passing year, and the problem now engaging the attention of the courts is that of according protection to the nonresident engaged in interstate commerce against the effect of laws that would unjustly discriminate against interstate commerce and at the same time to prevent the commerce clause of the Constitution from working a discrimination against resident citizens who are required to pay taxes similar to those here sought to be imposed for doing an intrastate business of the same kind and character.
In the case of Browning v. Waycross,
In General Railway Signal Co. v. Com. of Virginia,
Thereafter in the case of York Manufacturing Co. v. Colley,
In the recent case of Case v. Mills Novelty Co.,
But aside from the confusion, if any exists, as to what has been held in former decisions to be a burden upon interstate commerce in the application of state statutes in denying the right of access to the courts for the enforcement of contracts, it must be kept in mind that the *653
present trend of judicial decisions in upholding tax statutes is in favor of a more liberal construction in holding that unless the tax complained of tends to prohibit interstate commerce or place it at a disadvantage in competition with intrastate commerce, it does not violate the commerce clause of the Federal Constitution, and especially where the tax is not on the commerce but is levied on the right to engage in a local activity for the exercise of which local citizens are required to pay. This thought was given expression in the case of A.H. Stone, Commissioner, v. Interstate Natural Gas Co.,
The decision in the case, supra, was affirmed by the Supreme Court of the United States without an opinion, which action under the facts there involved did not necessarily mean that the court based its decision upon the reasoning of the trial court, but we find that in the later case of McGoldrick v. Berwind-White Coal Min. Co.,
It is true, as contended by the appellee, that a different state of facts were involved in the McGoldrick case, supra, wherein a state sales tax statute of New York was upheld, and that this is likewise true in the recent cases decided by this court, Stone v. General Contract Purchase Corporation,
Where such a substantial portion of the contract for the sale, installation, adjustment and testing of the air-conditioning systems involved in this case was performed in this state, as a condition precedent to its final acceptance *656 by the purchaser, in the exercise of a local activity to the extent disclosed by the declaration in this case, the contention of the appellee as to its nonliability for the taxes in question, if sustained, would work an unjust discrimination against those residing in this state who may undertake to manufacture and install machinery and equipment in connection with many of the projects enumerated by the statute and also where the materials for any of such projects are ordered and shipped in interstate commerce from manufacturers out of the state and assembled and installed by local residents who may be engaged in the business of contracting in this state and liable for the taxes in question. In our opinion the tax here imposed has equality as its theme and that the statutes in question apply to the activity in which the appellee is here engaged.
The judgment of the court below in overruling the demurrer of the appellant is therefore reversed and the cause remanded.
Reversed and remanded.