89 S.W.2d 1026 | Tex. App. | 1935
This case is companion to and in most respects is controlled by our decision in the case of Group No. 1 Oil Corporation v. Sheppard, Comptroller, et al.,
We construe the taxing act in the companion case to levy the tax against the various interest holders in the oil produced or its value, including the producer and royalty owners other than the State University, ratably or in proportion to their respective interests. This construction of the act in the companion case disposes of most of the constitutional defenses interposed by appellants in this case, and only one additional constitutional question will be discussed.
Appellants contend that the taxing act in suit is violative of the obligation of contract clauses of both the State and Federal Constitutions (Const.Tex. art. 1, § 16; Const.U.S. art. 1, § 10, cl. 1), for the reasons: (1) That it impairs the antecedent obligations of appellants' lessee to deliver them the equal one-eighth part of the oil produced, free of costs, the taxing act in force at the time of the execution of the contract having required the lessee to pay the entire gross production tax on the oil; and (2) that the present taxing act requires the producer with whom appellants had a contract prior to the enactment of such taxing act to pay them the regular posted price for the royalty oil, to deduct from the royalty interests due the proportionate amount of the gross production tax, and remit the same to the state officials named. Manifestly this taxing act does not change in any manner the lease contracts between the parties. The tax is not against the oil royalty. It is levied as a gross production tax on the business or occupation of producing oil. The tax belongs to the state, and the mere fact that the producer is primarily liable for the payment of the tax, or the fact that the purchaser is required to collect the tax for the state at its source or origin, does not give them any interest in the tax against the royalty interests. They may have benefited by the change of legislative policy of imposing the tax ratably against the respective interest holders in the oil produced; but such legislative tax policy did not impair any obligation of the lease contracts.
In this connection appellants cite several cases in support of the contention that royalty owners under the ordinary form of oil and gas leases are not engaged in the business of producing oil. None of these cases is in point. The dicta in the case of Flynn, Welch Yates v. State Tax Commission,
The point involved was left undecided in Byrne v. Fulton Oil Co.,
We find no error in the judgment of the trial court holding the tax act to be constitutional and dismissing appellants' suit for a refund of the taxes paid, and it will be affirmed.
*1028Affirmed.