Opinion
No. 30543.
April 3, 1933.
1. COMMERCE.
Privilege taxes imposed on operators of cotton compresses and warehouses held not violative of Federal Warehouse Act (Laws 1930, chapter 88, sections 3, 57, 63, 242; United States Warehouse Act [see 7 U.S.C.A., section 241 et seq.]).
2. COMMERCE.
Privilege taxes imposed on operators of cotton compresses and warehouses held not undue burden on interstate commerce, since warehouse and compress are not instrumentalities of interstate commerce, in that assembling of cotton and its compression are acts preliminary but not absolutely essential to interstate transportation (Laws 1930, chapter 88, sections 3, 57, 63, 242, Constitution U.S. article 1, section 8, clause 3).
APPEAL from Circuit Court of Bolivar County.
Green, Green Jackson, of Jackson, for appellant.
Section 57, chapter 88, Laws of 1930, is unconstitutional as a burden upon interstate commerce.
State ex rel. v. Grenada Cotton Compress, 85 So. 137, 123 Miss. 191; approved, State ex rel. v. Mississippi Power Light Co., 138 So. 569, 162 Miss. 30; Conrad v. Miss. State Tax Commission, 133 So. 656, 160 Miss. 850; Pan American Petroleum Corporation v. Miller, 122 So. 396, 154 Miss. 565; Moore v. Standard Oil Co., 117 So. 371, 151 Miss. 23; Levee Board v. Howze, 116 So. 93, 149 Miss. 856; Planters Lumber Co. v. Wells, 112 So. 12, 146 Miss. 101.
Interstate and Foreign Commerce may not be burdened by a state privilege tax.
Miller v. G.M. N.R.R. Co., 127 So. 692, 157 Miss. 69; Pullman Palace Car Co. v. Adams, 78 Miss. 814, 30 So. 757, 84 Am. St. Rep. 647; Postal Telegraph-Cable Co. v. Miller, 124 So. 434, 156 Miss. 522; Miller v. Illinois Central Railroad Co., 111 So. 559, 146 Miss. 442; City Sales Agency v. Smith, 88 So. 626, 126 Miss. 202; State Tax Commission of Mississippi v. Interstate Natural Gas Company, 284 U.S. 31, 76 L.Ed. 156; Helson v. Kentucky, 279 U.S. 250, 73 L.Ed. 687; Matthews v. Rogers, 284 U.S. 521, 76 L.Ed. 447.
That done by the Compress Company with and at its compress was interstate commerce.
Interstate Commerce Act, section 1, 49 U.S.C.A., page 11; Southern Railroad Co. v. Reed, 222 U.S. 424, 56 L.Ed. 257; Swift Co. v. Hocking Valley R. Co., 112 N.E. 212, 93 Ohio St. 143, 243 U.S. 281, 61 L.Ed. 722; Railroad Co. v. Dettlebach, 239 U.S. 588, 60 L.Ed. 453; Commission v. Diffenbaugh, 222 U.S. 42, 56 L.Ed. 83; Omaha Elevator Co. v. Union Pacific Railroad Co., 249 Fed. 827; Oil Company v. Central Railroad of Georgia, 204 Fed. 476.
Concentration and compression has been regulated as interstate commerce.
Thomas Cotton Co. v. I.C.R.R., 63 I.C.C. 89, 92; Commission v. C. of G. Ry., 45 I.C.C. 516, 519; In re Cotton to Gulf Ports, 123 I.C.C. 685, 702; Savannah Traffic Bureau v. A. R.R.R., 96 I.C.C. 749; New Orleans Cotton Exch. v. L. N.R.R., 46 I.C.C. 712; Cotton from Tennessee River Landings, 120 I.C.C. 51; McFadden Bros. Agency v. A. R.R.R., 126 I.C.C. 519; Augusta Cotton Exch. v. G. F. Ry., 146 I.C.C. 245; General Rate Structure Investigation, 17000, part 3, Cotton, page 605; Gregg Dyeing Co. v. Query, 286 U.S. 476, 76 L.Ed. 1236; Southern Pac. Co. v. Calexico, 288 Fed. 642; Omaha Elevator Co. v. Union Pac. R. Co., 249 Fed. 832; State v. S.A. A.P. Ry. Co. (Tex.), 73 S.W. 575; Alabama G.S.R. Co. v. M'Fadden Bros., 232 Fed. 1003; United States v. Gosho Co. (5 C.C.A.), 23 F.2d 675; Kellogg v. Railway Co., 204 App. Div. 246; Harrington v. Missouri Pac. R. Co. (Kan.), 254 P. 380; Swift v. U.S., 196 U.S. 397, 49 L.Ed. 524; Stafford v. Wallace, 258 U.S. 495, 66 L.Ed. 735; Lamke-Farmer's Grain Co. case, 258 U.S. 53, 66 L.Ed. 461; Dahnke v. Bondurant, 257 U.S. 290, 66 L.Ed. 243; Board v. Olsen, 262 U.S. 1, 67 L.Ed. 839.
The movement of cotton from Mississippi through this plant to the outside world in and of itself is interstate commerce, an integral element in an ever moving stream, whose motion must be kept constant, otherwise its stuffing would dam the current and destroy the commerce.
People v. Perry (Cal.), 291 P. 237; Lawrence v. Commission, 286 U.S. 280, 76 L.Ed. 1106; Stafford v. Wallace, 258 U.S. 495, 66 L.Ed. 735; Board of Trade v. Olsen, 262 U.S. 1, 67 L.Ed. 839; Swetland v. Curtiss Airports, 41 F.2d 929; Railroad Commission v. C.B. Q.R. Co., 257 U.S. 563, 588, 42 S.Ct. 232, 237, 66 L.Ed. 371, 22 A.L.R. 1086; Hohenberg v. L. N.R. Co., 46 F.2d 952, at 955; Baltimore Ohio S.W.R. Co. v. Settle, 260 U.S. 166, 43 S.Ct. 28, 67 L.Ed. 189; Greater New York Live Poultry Chamber of Commerce v. United States, 47 F.2d 156.
The privilege tax is inseparable and if applicable to any portion of interstate commerce is therefore void.
Ballard v. Miss. Cotton Oil Co., 81 Miss. 507; Bowman v. Continental Oil Co., 256 U.S. 642, 65 L.Ed. 1139.
Most of the cotton compressed has already been sold in interstate commerce and its compression is but a step in the delivery thereunder.
Sonneborn Bros. v. Keeling, 262 U.S. 515, 67 L.Ed. 1100.
We are dealing here with compression and the compress, that thereat done, not the storage of the cotton. Compression appertains solely to the interstate movement and conditions it. Without compression it would be impossible. It is feasible only through compression and where that so thus moving is moving pursuant to precedent sale, thereby it is unquestionably interstate commerce.
Foster-Fountain Packing Co. v. Haydel, 278 U.S. 10, 73 L.Ed. 153; Carson Petroleum Co. v. Vial, 279 U.S. 104, 73 L.Ed. 631; United States v. Erie R. Co., 280 U.S. 101, 74 L.Ed. 206; Western Cartridge Co. v. Emmerson, 281 U.S. 513, 74 L.Ed. 1007; United States v. Gosho Co. (5 C.C.A.), 23 F.2d 675; Harrington v. Mo. Pac. R. Co. (Kan.), 254 P. 380.
We submit that as the tax on compresses, which appertains solely to the movement in interstate commerce, is payable by the carrier for the conservation of space in their cars after the movement therein has begun, this tax is a direct burden upon interstate commerce and as such void.
Hughes Bros. Timber Co. v. Minn., 272 U.S. 469, 71 L.Ed. 259; Missouri Pacific v. Roy Strout, 267 U.S. 408, 69 L.Ed. 685.
Section 63, chapter 88, Laws of 1930, is unconstitutional being (a) undue burden as to cotton in interstate commerce; and (b) a direct tax upon a federal instrumentality.
Oregon-Washington R. Nav. Co. v. Washington, 270 U.S. 87, 70 L.Ed. 483; Board of Trade v. Olsen, 262 U.S. 1, 67 L.Ed. 837, 850; Swift Co. v. United States, 196 U.S. 375, 49 L.Ed. 518, 25 Sup. Ct. Rep. 276; Stafford v. Wallace, 258 U.S. 495, 66 L.Ed. 735; Carson Petroleum Co. v. Vial, 279 U.S. 104, 73 L.Ed. 631; M'Fadden v. A.G.S.R. Co., 241 Fed. 565; Chicago Portrait Co. v. Bellingham, 270 Fed. 584; State v. S.A. A.P. Ry. Co. (Texas), 73 S.W. 575; Furst v. Brewster, 282 U.S. 498, 75 L.Ed. 481; Federal Trade Commission v. Pacific States P.T. Asso., 273 U.S. 64, 71 L.Ed. 539; Lemke v. Farmers' Grain Co., 258 U.S. 53, 66 L.Ed. 461; Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 290, 66 L.Ed. 243; Hump Hairpin Mfg. Co. v. Emmerson, 258 U.S. 294, 66 L.Ed. 625; Crescent Cotton Oil Co. v. Mississippi, 257 U.S. 136, 66 L.Ed. 170; Bowman v. Continental Oil Co., 256 U.S. 646, 65 L.Ed. 1144; Shafer v. Farmers Grain Co., 268 U.S. 198, 69 L.Ed. 914; Real Silk Hosiery Mills v. Portland, 268 U.S. 334, 69 L.Ed. 982; Ozark Pipe Line Corp. v. Monier, 266 U.S. 565, 69 L.Ed. 443; Flanagan v. Federal Coal Co., 267 U.S. 222, 69 L.Ed. 583; Binderup v. Pathe Exch., 263 U.S. 291, 309, 68 L.Ed. 308, 316, 44 Sup. Ct. Rep. 96; Texas Transport, etc. v. New Orleans, 264 U.S. 150, 68 L.Ed. 611; Southeastern Express Co. v. Miller, 264 U.S. 540, 68 L.Ed. 841; Atchison, T. S.F. v. Harold, 241 U.S. 371, 60 L.Ed. 1050.
Where the United States has exercised its exclusive power over interstate commerce so far as to take possession of the field the states no more can supplement its requirements than they can annul them.
Pennsylvania R. Co. v. Commission, 250 U.S. 566, 63 L.Ed. 1143; Western Oil Refining Co. v. Lipscomb, 244 U.S. 346, 61 L.Ed. 1181.
This warehouse was thus a federal instrumentality, regulated and requisite, and so being, the state could not tax that therein done, because it was powerless to prohibit.
Independent Gin, etc. v. Dunwoody, 30 F.2d 307, 40 Fed. 2d 1; Jaybird Mining Co. v. Wier, 271 U.S. 609, 70 L.Ed. 1114; New Jersey Bell Tel. Co. v. Board, 280 U.S. 346, 74 L.Ed. 467; T. N.O.R. Co. v. Brotherhood, 281 U.S. 570, 74 L.Ed. 1046; Di Santo v. Pennsylvania, 273 U.S. 37, 71 L.Ed. 527; McFadden Rice Milling Co. v. T. N.O. Ry. Co. (Tex.), 277 S.W. 193; Miller v. Illinois Cent. R. Co., 111 So. 558, 146 Miss. 422. W.W. Pierce, Assistant Attorney-General, for appellee.
Until cotton is actually loaded and on its way to another state, or committed to a common carrier for transportation to such other state, it cannot be in interstate commerce and in a channel of interstate commerce. All of the authorities seem to agree with this proposition.
Coe v. Errol, 116 U.S. 517, 29 L.Ed. 715; Diamond Match Co. v. Village of Ontonagon, 188 U.S. 81, 47 L.Ed. 394; American Mfg. Co. v. St. Louis, 250 U.S. 459, 63 L.Ed. 1084, 198 S.W. 1183, 63 L.Ed. 1084; Crescent Cotton Oil Co. v. State of Mississippi, 257 U.S. 129, 66 L.Ed. 166; Carson Petroleum Co. v. Vial, 279 U.S. 94, 75 L.Ed. 626.
The beginning of the transit which constitutes interstate commerce is defined in Coe v. Errol to be the point of time that an article is committed to a carrier for transportation to the state of its destination, or started on its ultimate passage.
McCluskey v. Mayersville, 61 L.Ed. 578; General Oil Co. v. Crain, 52 L.Ed. 574; Merchants Exch. of St. Louis v. State of Missouri, 63 L.Ed. 300; Hope Natural Gas Co. v. Hall, State Tax Commissioner of West Virginia et al., 71 L.Ed. 1049; Oliver Iron Mining Co. v. Lord, 262 U.S. 172, 67 L.Ed. 929; Philadelphia Reading R.R. Co. v. Commonwealth of Pennsylvania, 82 U.S. 164; Rowland C. Heisler v. Thomas Colliery Co. et al., 67 L.Ed. 237; Utah Power Light Co. v. Pfost, 286 U.S. 163, 76 L.Ed. 1038.
We submit that the act of compression is only a further step in the preparation of cotton to enter the channels of interstate commerce, so that same can be transported economically as a commodity of interstate commerce.
The position of appellant, when followed to its ultimate conclusion, would make every farmer, who loads a bale of seed cotton on his wagon or truck in his field, to haul it to a gin for the purpose of separating the seed from the lint, engaged in interstate commerce, and his wagon and team or truck would be exempt from the imposition of a state tax. The same would be true of a person operating a cotton gin. We do not think that counsel for appellant would for one moment contend that a farmer hauling his cotton to the gin, and a ginnery engaged in separating the seed from the lint are engaged in interstate commerce.
The operator of a compress and warehouse, licensed under the provision of the United States Warehouse Act, is not a federal instrumentality so as to be exempt from state taxation.
The principle of immunity from state taxation of instrumentalities of the federal government has its inherent limitations. It is aimed at the protection of the government. The statute in question imposing the privilege tax is what it purports to be — a business tax on the privilege of engaging in the business of operating a cotton warehouse and compress. There is no purpose to tax instrumentalities of United States government.
McCulloch v. Maryland (U.S.), 4 L.Ed. 579, 608; Indian Motorcycle Co. v. United States, 283 U.S. 270, 576, 579.
The mere fact that the appellant has made application to the Department of Agriculture and qualified as a bonded warehouseman under the United States Warehouse Act, to fulfill a governmental purpose, does not make it immune from state taxation, when the compress and warehouse is held in private ownership and the privilege is exercised for private advantage.
Susquehanna Power Co. v. Tax Commission, 283 U.S. 291, 75 L.Ed. 1042.
It is apparent that the appellant in storing and compressing cotton, is not acting as an agent for the federal government.
Fox Film Corp. v. Doyal, 286 U.S. 123.
The privilege is not laid upon the license granted by the Department of Agriculture, but upon the storing and compression of cotton, which it does at its own pleasure and exclusively for its own profit.
Utah Power Light Co. v. Pfost, 286 U.S. 165; Railroad Co. v. Penniston, 18 Wall. 5, 33; Choctaw O. G. Railroad Co. v. Mackey, 256 U.S. 53; Wilcutts v. Bunn, 282 U.S. 216; Williams v. Talladega, 226 U.S. 404; Western Union Telegraph Co. v. Mass., 125 U.S. 530; Western Union Telegraph Co. v. Gottlieb, 190 U.S. 412; Henderson Bridge Co. v. Kentucky (U.S.), 41 L.Ed. 953; Keokuk H. Bridge Co. v. Illinois (U.S.), 44 L.Ed. 299; St. Louis-San Francisco R.R. Co. v. Middlecamp (U.S.), 65 L.Ed. 905.
Argued orally by Garner Green, for appellant, and by W.W. Pierce, for appellee.
The appellant is a Delaware corporation, and owns and operates a cotton warehouse and a cotton compress at Cleveland, Mississippi. Section 57, chapter 88, Laws of 1930, imposes a privilege tax "upon each person operating a cotton compress," graduated according to the number of bales compressed per annum. Section 63 of the same statute imposes a privilege tax "upon each person operating a warehouse for the storage of cotton, whether in conjunction with a compress or not," graduated according to the storage capacity of the warehouse. These privilege taxes must be paid before the warehouse and compress can be operated, sections 3 and 242 of the statute. The appellant paid the appellee tax collector, under protest, the privilege taxes required of it under these statutes, and has brought this suit to recover the same.
The case was tried on an agreed statement of facts. The court directed the jury to return a verdict for the appellee, and there was a judgment accordingly.
The appellant's complaints are: First, the statute, as applied to it, violates the United States Warehouse Act (see 7 U.S.C.A., section 241 et seq.); and, second, regulates or imposes a burden on interstate commerce beyond the state's power to do under the commerce clause of the Federal Constitution.
The following facts appear from the agreed statement of facts: Cotton, after being picked, is ginned and packed into bales of approximately five hundred pounds each. The general and uniform custom under which cotton is marketed is to transport it from its place of production by rail or truck to a warehouse or compress, the owner receiving from the warehouse a negotiable receipt therefor. The cotton is then sold to buyers, who purchase it for the purpose of selling and shipping it in interstate commerce. All of the cotton, except such a few bales thereof as to be negligible, that has passed through the appellant's warehouse and compress, has been shipped therefrom to other states or countries. The appellant has a contract with the Yazoo Mississippi Valley Railroad Company, near the right of way of which its warehouse and compress are situated, one of the provisions of which is as follows:
"The intent and purpose of this agreement, among other things, is to confirm the Compress Company as the limited agent of the railroad company for the purposes of receiving cotton from the railroad company, delivering cotton to the railroad company, loading and unloading cotton from and into the cars of said railroad company, making proper delivery of cotton in the custody of said compress company so far as concerns the interest of the railroad company, and as principal to furnish the premises for the use of the railroad company as a cotton depot under and subject to all of the terms and conditions of this agreement and the lawfully published tariffs and regulations of the railroad company from time to time in effect with respect to the transportation and handling of cotton."
When the purchasers of these warehouse receipts have sold, and desire to ship, the cotton to other states or countries, they surrender the receipts to the appellant which then compresses the cotton, thereby reducing the size of the bale, and loads it into cars of the railroad company, which then issues a bill of lading therefor. The rate charged by the railroad company for transporting the cotton that had been shipped to the compress from an interior point on a local bill of lading is the through rate from the point from which it was shipped to the appellant to its point of destination under the new bill of lading; credit thereon being given the shipper on the surrender of the receipt for the transportation charged under the prior local bill of lading. The appellant's charges for compressing the cotton are paid by the railroad company, which, together with the railroad's transportation charges, are with the approval of the Interstate Commerce Commission.
The appellant's complaint that the exaction of these privilege taxes, as applied to it, violates the United States Warehouse Act, may be summarily disposed of by say-that it is wholly without merit.
The appellee concedes, and for the purpose of the argument we will assume, that these taxes as applied to the appellant violate the interstate commerce clause of the Federal Constitution, if its warehouse and compress are essential means and instrumentalities of interstate commerce.
The cotton, moving through the appellant's warehouse and compress, entered into, and became a part of, interstate commerce when, but not until, it commenced its journey from this state to another state or country; in other words, when the cotton was delivered to the railroad company for transportation into another state or country. This did not occur until it was delivered to the railroad, after being compressed, for transportation. Coe v. Errol, 116 U.S. 519, 6 S.Ct. 475, 29 L.Ed. 715; Diamond Match Co. v. Village of Ontonagon, 188 U.S. 82, 23 S.Ct. 266, 47 L.Ed. 394. The assembling of the cotton in the warehouse and its compression are acts preliminary, convenient for, but not absolutely essential, to its transportation to other states or countries. Authorities supra; and Munn v. People of Illinois, 94 U.S. 113, 24 L.Ed. 77; W.W. Cargill Company v. Minnesota, 180 U.S. 452, 21 S.Ct. 423, 45 L.Ed. 619; Merchants' Exchange of St. Louis v. Missouri, 248 U.S. 365, 39 S.Ct. 114, 63 L.Ed. 300; 12 C.J. 38, pp. 94, 103. The appellant's warehouse and compress, therefore, are not instrumentalities of interstate commerce; consequently the privilege taxes collected thereon imposed no unconstitutional burden on that commerce.
Affirmed.