14 F. Supp. 312 | S.D.W. Va | 1936
This is a suit in equity, brought by the plaintiff, seeking to restrain the collection of certain taxes imposed by the state of West Virginia. A District Court of three judges, organized in accordance with section 266 of the Judicial Code, as amended (28 U.S.C. § 380 [28 U.S.C.A. § 380]), heard the case on complainant’s application for interlocutory and permanent relief. Originally the suit was brought in admiralty, but thereafter was brought again in equity- by agreement of the parties. The suit appears clearly to be properly cognizable in equity and not in admiralty. The nature and subject of the controversy, not the location, is the test of admiralty jurisdiction. 1 R.C.L. 413. The test is the nature of a claim upon which the suit is founded. 1 C.J. 1251.
The plaintiff’s steamboats are engaged in the excursion business on the Ohio river, conducting excursions from various localities in the state situate on that river. It is admitted that the boundary of the state of West Virginia extends to the low-water mark in the Ohio river, on the shores of the state of Ohio, and the state of West Virginia imposes taxes upon the activities engaged in on the excursion boats while excursions are conducted within the northern and southern boundaries of the state of West Virginia. In the taxes collected is included the refreshment tax set out in the findings of fact. Three contentions áre made on behalf of the plaintiff:
(1) That the steamboats operated by the plaintiff, in the course of conducting the excursions, actually cross the boundary of the state of Ohio and enter that state, making the excursions conducted interstate commerce and exempting all the business of the boats from taxation by the state of West Virginia.
(2) That the levying of the taxes in question is beyond the power of the state-of West Virginia because of the Northwest Territory Ordinance and certain declarations of the state of Virginia and the state of West Virginia.
(3) That the levying of the taxes in question is beyond the power of the state of West Virginia by reason of the exclusive jurisdiction of the United States over the Ohio river as a navigable stream.
The questions here involved must be considered in the' light of the admitted power of a sovereign state to tax within its territorial limits, unless such power is restrained by a paramount law. This sovereign power to tax is general and extensive. The principle is stated in Cooley on Taxation (4th Ed.) § 117, p. 262: “A state has the inherent power to tax all persons, property and business, provided they are within its territorial limits, for public purposes, without regard to whether already taxed in another state, except property of the United States and federal agencies, subject to limitations imposed by the Federal and State Constitutions.”
In the same text (section 69, p. 173) the same principle is otherwise stated: “Unless restrained by provisions of the Federal Constitution, the power of the state as to the mode, form and extent of taxation is unlimited, where the subjects to which it applies are within her jurisdiction.” See, also, Ruling Case Law, title, States, vól. 25, § 9, p. 376; Ruling Case Law, title,
It is well established that included in the limitations upon the power of the sovereign state to tax is the denial of the right to tax interstate commerce. As was said by the Supreme Court in Cooney et al. v. Mountain States Telephone & Telegraph Co., 294 U.S. 384, 55 S.Ct. 477, 481, 79 L. Ed. 934: “But a state cannot tax interstate commerce; it cannot lay a tax upon the business which constitutes such commerce or the privilege of engaging in it. And the fact that a portion of a business is intrastate and therefore taxable does not justify a tax either upon the interstate business or upon the whole business without discrimination.”
In considering the first contention made on behalf of the plaintiff, we are of the opinion that the record does not show that the steamboats operated by the plaintiff, in the course of conducting the excursions, actually cross the boundary line of the state of West Virginia or that they at any time enter the state of Ohio. This court can take judicial cognizance of things of general knowledge and public interest which it should know, such as the fact th'at the Ohio river is navigable, but the court • cannot take judicial cognizance of facts that are not matters of general knowledge but which should be proven. United States v. Rio Grande Dam & Irrigation Co., 174 U.S. 690, 19 S.Ct. 770, 43 L.Ed. 1136. While it is true that the boundary line of the state of West Virginia may not be changed of extended by improvements made by the government in the erection of locks and dams that raise the general level of the water in the Ohio river, yet it is not at all certain that in landing at an Ohio town or city the plaintiff’s steamboats conducting the excursions are ever in the state of Ohio. The record shows that these steamboats are of a large size; we know that a steamboat of that size usually lands at a wharf boat anchored out in the river and attached to the shore. How can it be said, in the absence of specific proof, that these excursion boats, while lying along side of wharf boats of unknown dimension, are above low-water mark on the Ohio side of the river? All these facts are susceptible of proof, and here there is no proof. The burden is upon the plaintiff, and it has not been sustained. If the steamboats in question, in conducting the excursions described, are engaged in interstate commerce because they at some time pass beyond the boundaries of West Virginia, a question of grave doubt, it is not shown. As was said by Mr. Justice Brandeis in Sprout v. City of South Bend, 277 U.S. 163, 48 S.Ct. 502, 503, 72 L.Ed. 833, 62 A.L.R. 45: “The actual facts govern. For this purpose, the destination intended by the passenger when he begins his journey and known to the carrier, determines the character of the commerce.”
In Mayor, etc., of City of Vicksburg v. Streckfus Steamers, 167 Miss. 856, 150 So. 215, it was held by the Supreme Court of Mississippi that excursions of the character here involved did not make the business of the boats interstate commerce.
A decision of the District Court of the United States for the Western District of Kentucky,
We are of the opinion that the levying of the tax in 'question is not beyond the power of the state of West Virginia because of the inhibition contained in the Northwest Territory Ordinance and the declarations of the -state of Virginia and the state of West Virginia. The Northwest Ordinance and the acts of the two states, as well as the Constitution of the United States, all establish the fact that the waters of the Ohio river should be forever free, “without any tax, impost, or duty therefor.” The taxes here sought to be levied by the state of West Virginia are in no sense a tay upon navigation nor tax, impost, or duty for navigation; they are business, license, and sales taxes imposed upon transactions conducted within the limits of the boundaries of the state of West Virginia, and we know of no reason why they cannot be imposed, whether the business taxed be conducted upon the land or upon a steamboat on a navigable stream within the boundaries of the state. Certainly there is nothing in the North
A tax upon the sale of beer upon a steamboat on a river is not a tax upon the right to navigate the river, and the various activities carried on by the boats while conducting the excursions are taxed incident to the entertainment and pleasure of the excursionists and not to the navigation of the boats. The waters of the Ohio river are none the less “free” because a business conducted on a steamboat, while navigating the river, is taxed.
The Passenger Cases are relied upon on behalf of the plaintiff, but we do not think they are controlling of the question here.
We are of the opinion that the levy of the taxes in question, when confined to activities conducted within the boundaries of the state of West Virginia, is not beyond the power of the state of West Virginia by reason of the exclusive jurisdiction of the United States over the Ohio river as a navigable stream. That the jurisdiction of the United States over a navigable stream is exclusive as far as it extends is well settled, but that the exclusive jurisdiction of the national government is limited is equally as well settled. In some respect the jurisdiction of the national and state governments over navigable rivers within the boundaries of the state are concurrent, but this does not mean that the jurisdiction of the national government in any way destroys the title of the sovereign state. In Union Sand & Gravel Co. v. Northcott et al., 102 W.Va. 519, 135 S.E. 589, the Supreme Court of West Virginia clearly sustains the right of the state of West Virginia to grant title to an island and sand bar in the river, and in the case of Nicoulin v. O’Brien, 172 Ky. 473, 189 S. W. 724, affirmed by the Supreme Court of the United States in Nicoulin v. O’Brien, 248 U.S. 113, 39 S.Ct. 23, 63 L.Ed. 155, the right of the State of Kentucky to protect its fish in the Ohio river to the low-water mark on the Indiana side was upheld. See, also, Memphis & C. Packet Co. v. Pikey, 142 Ind. 304, 40 N.E. 527; J. S. Keator Lumber Co. v. St. Croix Boom Corporation, 72 Wis. 62, 38 N.W. 529, 7 Am. St.Rep. 837.
In the case of Henderson Bridge Co. v. City of Henderson, supra, the right of the state of Kentucky, exercised through a municipal corporation, to tax an interstate bridge to the boundary line of the state of Kentucky (low-water mark on the Indiana side), was upheld. The power of Congress to regulate the use of navigable streams is limited and in no way conflicts with the power, properly exercised, of the states to tax business activities. The jurisdiction of the federal government over navigable streams is for the purposes of navigation. The title of the state may be said to be subject to a servitude in respect of navigation created in favor of the federal government by the Constitution. Gibson v. United States, 166 U.S. 269, 17 S.Ct. 578, 41 L.Ed. 996. The cases relied upon on behalf of the plaintiff all deal with questions connected directly with navigation and are not controlling here.
It is admitted on behalf of the plaintiff that the state of West Virginia has jurisdiction over crimes committed upon the Ohio river and that West Virginia has the power to prohibit certain businesses from being conducted on the river, as, for instance, the sale of alcoholic beverages if such sale is prohibited in the entire state. Certainly, if the state has the power to prohibit the carrying on of a business on the river, it has the power to license or tax the carrying on of the business. The state could not, of course, make it a crime to navigate the river, because of superior jurisdiction over navigation and all questions connected therewith, but this superior jurisdiction, as we have said above, is limited and does not in any way extend to questions not connected with navigation and interstate commerce. It can readily be seen what a chaotic condition would result did the state not have the power to control business activities upon the river, activities in no way connected with navigation. Boats or barges, or any craft coming under
It is contended on behalf of the plaintiff that some of the taxes involved are taxes upon the citizens of another state, as, for instance, when citizens of Ohio are taken on excursions, the state of West Virginia has not the right to so tax citizens of other states, and that it would be impossible to separate taxes collected from the citizens of Ohio from those collected from citizens of West Virginia. We cannot agree with this contention. The tax is levied, not upon the citizen of another state, but upon sales within the state of West Virginia. A citizen of Ohio, traveling into the state of West Virginia and stopping at a store, is required to pay the consumers’ sales tax, not because he is a citizen of Ohio, but because he is making a purchase in the state of West Virginia, a purchase legally taxable under the laws of that state. A hunting or fishing license, required of a nonresident of a state, to hunt or fish within the state, is required, not because the licensee is a nonresident, but because the hunting or fishing is done within the state requiring the license.
The defendant admits that it does not require the plaintiff to collect the consumers’ sales tax on tickets sold within the state of Ohio, because such sales are clearly made outside the boundaries of the state of West Virginia, yet the defendant does require sums of money realized from such sales to be included in the business or gross sales tax returns of the plaintiff. We can see no reason for such discrimination. The plaintiff should not be required to pay a gross sales tax upon these sums. Without deciding, because proof is lacking, that on any excursions, even though passengers were received from the Ohio side, any of plaintiff’s boats were actually ever beyond the territorial limits of West Virginia, and therefore without deciding whether any excursions actually constituted interstate commerce, the West Virginia gross sales tax is not collectible on tickets sold in the state of Ohio because the language of the West Virginia Gross Sales Tax Act, under which the tax has been assessed, clearly negatives any intention to include such sales. The language is as follows (West Virginia Revenue Law, chapter 33, 1st Ex.Sess. 1933, § 2 (g) : “Upon every person engaging or continuing within this state in the business of operating a theater, opera house, moving picture show, vaudeville, amusement park, dance hall, skating rink, race track, radio broadcasting station or any other place at which amusements are offered to the public, the tax shall be equal to one and one-half per cent of the gross income of the business.”
• It is to be noted that the business covered by the statute is business “within this state” (West Virginia), and that the tax is on “the gross income of the business,” which, fairly interpreted, means only the business just referred -to. The text is the same in the 1935 act (chapter 86, § 2 (g).
For reasons above given, the injunction will be denied as to the collection of all taxes by the state of West Virginia, with the exception of that portion of the gross sales tax levied upon sums derived from the sale of tickets in Ohio. As to the collection of this portion of the gross sales tax, unless the defendant- agrees to waive collection of same and refund the amounts collected and paid under protest, the injunction will be awarded and judgment will be given plaintiff for such sums when the amount thereof is ascertained. The costs of this suit will be assessed against the defendant.
Streckfus Steamers, Inc., et al. v. City of Louisville, decided June 16, 19S0, not reported.