Combined Metals Reduction Co. v. State Tax Commission

WADE, Justice. Appeal by the State Tax Commission from judgments entered against it in favor of the mining companies, the respondents herein. Each of the mining companies had filed a complaint against the Tax Commission to recover occupation taxes paid under protest for the year 1943. The issues in all the cases being the same they were consolidated for trial. The cases were submitted on written stipulations of the facts and the court’s findings and conclusions were based on these stipulations. During the course of this last war, our Federal government found it necessary in order to prevent hoarding, price spiraling, inflation and profiteering due to the great demands of the war upon our natural resources, to set up an Office of Price Administration, a Federal agency, whose duty it was to maintain price stability and prevent undue *158 price rises. This agency established certain maximum price schedules on commodities and it became unlawful to buy or sell any commodity above the “ceiling price” by the OPA. In August of 1941, in pursuance of this policy, the OPA established a price schedule on metals. It soon became apparent that under this price schedule there would be an insufficient production of metals because a great many mining companies would not be able to operate at a profit and as a result our war effort would be hampered. In view of this and in order to facilitate the greatest possible production of copper, lead and zinc, the War Production Board and the OPA announced a “premium plan” whereby the Metals Reserve Company would pay a premium or bonus for the production of all copper, lead and zinc in excess of quotas which it would establish for each producer. Although the Metals Reserve Company was authorized to buy directly from producers at higher prices than those established by the OPA, none of the mining companies here involved sold its metals to it but sold to private industries at the maximum' prices allowed by the OPA regulations and then received “premium payments” from the Metals Reserve Company under the “premium payment plan” for all metals which were produced in excess of the quotas assigned to each company respectively. The State Tax Commission in making its assessments under the mining occupation tax statute which provides that mining companies must pay “an occupation tax equal to one per cent of the gross amount received for or the gross value of metalliferous ore sold” included the “premium payments” received by the respective mining companies from the Metals Reserve Company. The companies objected to this inclusion in the assessment and paid under protest that part of the tax which was based on. these “premiums,” and then filed suits in the district court to recover these taxes. The district court found in their favor. Whether the “premium payments” made by the Metals Reserve Company for the production of metalliferous ores *159 in excess of quotas allocated to each company was properly included in determining the taxes due involves a construction of Sec. 80-5-66, U. C. A. 1948, which reads in part as follows: “Except as herein, otherwise specifically provided, every person engaged in the business of mining or producing ore containing gold, silver, copper, lead, iron, zinc or other valuable metal in this state shall pay to the state of Utah an occupation tax equal to one per cent of the gross amount received for or the gross value of metalliferous ore sold which tax shall be in addition to all other taxes provided by law “The basis for computing the occupation tax imposed by this act for any year shall be as follows: “(a) If the ore or metals extracted is sold under a bona fide contract of sale the amount of money or its equivalent actually received by the owner, * * * operating the mine or mining claim from the sale of all ores or metals during the calendar year less a reasonable cost, if any, of transporting the ore from the place where mined to the place where, under the contract of sale, the ore is to be delivered. “ (b) If the extracted ore is treated at a mill, smelter or reduction works which receives ores from independent sources and which is owned or controlled by the same interests owning or controlling the mine or mining claim, such disposal shall be treated as a sale within the meaning of this section for the purpose of determining gross proceeds or otherwise, * * *.” Appellants contend the court erred in holding that the “premium payments’' made by the Metals Reserve Company to the mining companies for production in excess of quotas allocated to each respectively were not properly included in determining the amount of the occupation taxes assessed, because the basic purpose of the statute is to levy an occupation tax “Equal to one per cent of the gross amount received for or the gross value of metalliferous ores sold” and these payments were part of the gross amounts received for ores sold. They argue that although the statute provides “yardsticks” or “measuring rods” by which this amount can be determined, that nevertheless, these yardsticks apply only to cases which come clearly within their scope. That the mining companies do not come within the scope of subsec. (a) which is the stand *160 ard the mining companies contend should be used because all the metals produced, the value of which is involved in these cases, were sold to independent companies, because there could be no bona fide sales in view of the fact that the government controlled prices and distribution of products and there was no free, competitive market in which the mining companies could sell, nor were there purchasers who could buy without restraint. We cannot agree with this reasoning. Webster’s New International Dictionary defines “bona fide” as being “in or with good faith; without fraud or deceit * * The mere fact that the conditions under which contracts of sale are made are regulated by a government does not mean that the contracts are not entered into in good faith and are not bona fide contracts of sale. Appellants further contend that even though subsec. (a) should be considered the yardstick by which the commission must determine the taxes in these cases, nevertheless, the sale prices paid by the private industries under their contracts are not the sole criterion in fixing these taxes; that subsec. (a) should be so construed as to give effect to the intent of the act which is that the tax should be based on the gross amount received for or the gross value of the ores sold, and since subsec. (a) provides that the yardstick should be the money or its equivalent actually received by the owner from the sale, the “premium payments” were properly included because the mining companies actually received for the ores sold the “premium prices” as well as the purchase prices paid by the private industries under their contracts of sale. We are of the opinion that if the “premium payments” made by the Metals Reserve Company were actually paid for ores sold that it was proper to include these payments in determining the assessments for the occupation taxes as the statute does not specifically limit the base to be used in such assessments to the purchase prices paid under bona fide contracts of sale but rather bases it on the amounts actually received where ore is sold under bona fide contracts of sale. *161 Respondents argue that the “premium payments” were not given for ores sold.but were bonuses or subsidies given by the government to encourage the production of ores and did not affect the value of the ores, which value was ascertainable from the prices paid under the contracts of sale. Appellants urge that although the government was induced to make these premium payments because of the necessity of obtaining the greatest possible production of metals needed for the war effort and that the prices established by the OPA made it impractical to mine submarginal ores, that nevertheless, these premium payments were intended as further consideration for the metals sold, and they offer as proof of this the fact that the “premium prices” were included in the general price schedule fixed by the War Production Board, the Office of Price Administration and the Federal Loan Administrator, and also that it was considered necessary by these agencies to exempt these premium payments from the maximum price regulations established. We are of the opinion that there is merit to appellants’ contention. Although the “premium payment” plan was evolved for the purpose of making it possible to mine submarginal ores and to develop additional ore reserves and thus obtain production of urgently needed ores in our war effort, which production would not have been possible under the ceiling prices set for metals by the OPA, and although the mining companies could not get premium prices on all metals produced and sold by them, but only on those metals produced after the quotas which was allocated to each respectively had been fulfilled, nevertheless, the premium prices were paid only for such metals as were not only produced in accordance with the requirements of the plan, but which were also sold. This appears to us to be significant as indicating an intent on the part of the United States government to allow the payment of higher prices for certain metals sold and yet avoid a break in its program to avoid inflation. We base our conclusion that premium payments were made for ores sold and not for the mere production of *162 such ores upon part of a joint statement issued in February of 1942, by the War Production Board and the Office of Price Administration, wherein it is stated: “Premium payments will be based upon metal paid for under the terms of settlement contracts. Quotas, of course, will be fixed on the same basis. If no settlement contracts exist, quotas and premium, payments will be computed on the basis of 95, 90 and 85 per cent of the metal content in the case of copper, lead and zinc, respectively * * (Italics ours.) It is self-evident that metals are not paid for under settlement contracts unless such metals are sold. Since it appears that the “premium prices” paid to the mining companies are for metals sold by them, and since our occupation tax statute provides that the basis for determining the amount of taxes due where there has been a sale of metals under a bona fide contract of sale is “The amount of money or its equivalent actually received * * * from the sale * * It is our opinion that the lower court erred in holding that the “premium payments” received from the Metals Reserve Company should not have been included by the Tax Commission in determining the amounts due. Reversed. McDONOUGH, J., concurs.