Floyd v. Miller Lumber Co.

Humphreys, J; This suit was instituted in the chancery court of Pulaski County, and is an attack by individuals and corporations upon the constitutionality of act No. 118 of the Acts of the General Assembly of 1923, known as the severance tax law, in its application to timber.' The first section of the act levied an annual privilege tax upon each person, firm, corporation, or association engaged in the business, among other things, of severing timber from the soil, for commercial purposes. The fourth section of the act fixed a general rate of the tax at two ahd one-half per cent.' of the gross cash market value of the severed product, except on certain natural resources specially provided for in section five of the act. The fifth section of the act fixed a special rate at twenty-five cents a ton on bauxite, one cent a ton on coal,. and seven cents a thousand on timber. The fifth section of the act was amended at the same session of the Legislature by act No. 681 so as to impose a privilege tax of ten cents per ton on every shipper of manganese. The title of said act No. 118 is as follows: “An act to levy a privilege or license tax upon all persons, firms, corporations, or associations, or persons engaged in the business of severing natural resources from the soil or water, and requiring all those so engaged to make such reports of their business as may be necessary for the proper enforcement of this act.” The following abbreviated statement of the facts alleged in the bill appears in appellee’s brief: “Each of the plaintiffs is engaged in the business of the manufacture and sale of lumber and other timber products, in the conduct of which they sever their tim-her from the soil on which it is growing, the severance ■being merely an incidental step in the process of manufacture. Some of the plaintiffs own the land and .timber, while others own the timber alone, the title to the land being in some one else. “At the present time, and at all times heretofore, the land and the timber thereon, or the timber alone where the ownership of the timber is different from the ownership of the land, is and has been treated by the taxing authorities of the State as real property, and is and has been assessed in the same manner and on the same basis as all other real property pin the State. Plaintiffs have regularly paid all State and county taxes levied on such land and timber, or on the timber alone, as the case may have been, together with all other public impositions laid on such property under the laws of the State. “None of the plaintiffs are .engaged in the business of severing timber from the soil, but all are engaged in the business of manufacturing timber into lumber and other finished products, and the severance of timber is an incidental step in the conduct of their general manufacturing business. “Notwithstanding the fact that the value of timber in this State ranges from $2 a thousand feet to $50 a thousand feet, at the place of severance, the act imposes an arbitrary tax of seven cents a thousand feet on each and every class of timber, without any reference to its value. “Some of the timber owned by the plaintiffs is standing on island in navigable streams, and on lands bordering thereon, but which are outside of levees constructed along the streams, the soil of which has no use or value except to support or sustain the growth of timber thereon, as the land is not susceptible of cultivation, or capable of any other use. The sole income from such land is, and if . necessary must be, derived from the timber growing thereon, and this income cannot be realized without a severance of the timber.” Appellant filed a demurrer to the bill, which was overruled by the court, and, failing to plead further, decree was rendered declaring said acts, original and amendatory, unconstitutional and void, from which is this appeal. In annulling the acts the trial court ruled that act No. 681 did not repeal and supplant section 5 of act No. 118, and appellant contends that the ruling of the court in this respect was erroneous. We do not understand that appellees have made or are making any contention in this case against the amount of the tax sought to be enforced against them, but are claiming that no amount should be collected from them because of the unconstitutionality of the acts. Appellees have refrained from arguing, in their brief, the effect of act No. 681 upon section 5 of act 118, because, under their view of the case, the effect thereof is not within the issue. We agree with appellees that, after the trial court declared the acts unconstitutional, it was not within the issue to determine the effect of the amendatory act upon § 5 of the original act. Appellees are the attacking parties, and we pre-termit a discussion of any issues not presented by them. Amici curiae have filed a brief presenting views as to the effect of the amendatory act upon § 5 of the original act, but, not being within the issue, we refrain from expressing an opinion thereon. The constitutionality of the acts is first assailed upon the ground that they impose a property tax on timber because, it is argued, that any attempt to impose a tax on the only available use of a thing is, in effect, a tax upon the thing itself, and therefore a property tax. This test, invoked by learned counsel for ap-pellees, was repudiated in the ease of Fort Smith v. Scruggs, 70 Ark. 549; so said this court in the case of Standard Oil Company of Louisiana v. Brodie, 153 Ark. 114. In the last case cited this court took occasion to say that: “We are unwilling to subscribe unqualifiedly to the doctrine that a tax on the only available use of an article is, in every instance, a tax on the article itself.” Appellees assert that the statutes in question lay a tax upon the right to sever timber from the soil, which is the only available use that can be made of standing timber. The statutes do not lay a tax upon the mere act of severance, but upon the “business of severing timber from the soil for commercial purposes.” Those who sever their timber for other purposes are specifically exempt from the privilege tax imposed by the acts. This court has ruled that a tax laid upon residents of a city for the privilege of keeping and using wheeled vehicles is not a property tax and void because a double taxation, but is a privilege tax for using the public streets of the city. Fort Smith v. Scruggs, supra. And has likewise ruled, in Standard Oil Co. of La. v. Brodie, supra (quoting syllabus 4): “Acts 1921, p. 685, providing that persons, firms or corporations who sell gasoline, kerosene or other products to be used in propelling motor vehicles using combustible type engines over .the highways of this State shall collect from such purchaser one cent for each gallon so sold, imposes a tax upon the use of public highways, and is not invalid as imposing a tax on property in violation of the uniformity clause of the State Constitution, though the Legislature, by Acts 1921, p. 490, had previously imposed a privilege tax on automobiles according to their capacity.” The Supreme Court of the United States had occasion quite recently to determine whether a Minnesota statute laying a tax upon the occupation of mining coal was a property tax and void, or an occupation tax and valid. The court, through Mr. Justice VaN DeVaNter, said: “The parties differ about the nature of the tax, the plaintiffs insisting it is a property tax and the defendants that it is an occupation tax. Both treat the question as affecting the solution of other contentions. We think the tax in its essence is what the act calls it, an occupation tax. It is not laid on the land 'Containing the oré nor on the ore after removal, but on the business of mining the ore, which consists in severing it from its natural bed and bringing it to the surface, where it can become an article of commerce, and be utilized in the industrial arts. Mining is a well recognized business wherein capital and labor are extensively employed. This is particularly true in Minnesota. Obviously a tax laid on those who are engaged in that business, and laid on them solely because they are so engaged, as is the case here, is an occupation tax. It does not differ materially from a tax on those who engage in manufacturing.” Oliver Iron Milling Co. v. Lord, 262 U. S. 172. Following the lead of the Supreme Court and the trend of our own decisions, and for purposes of uniformity, a thing to be desired, a majority of the court, including the writer, have concluded that the tax imposed by the acts is a privilege and not. a property tax. As a privilege tax, it is clearly and definitely authorized by the Constitution. “The General Assembly shall have power, from time to time, to tax hawkers, peddlers, ferries, exhibitions, and privileges in such manner as may be proper.” Const. 1874. art. 16, § 5. The extent of the taxing power vested by this section of the Constitution in the Legislature of the State was the subject of review in the ease of Fort Smith v. Scruggs, supra. Bearing upon the point the following excerpts from the works of Judge Cooley were quoted approvingly by Mr. Justice Riddick: “Everything to which the legislative power extends may be the subject of taxation, whether it be person or property, or possession, franchise, or privilege, or occupation, or right. Nothing but express constitutional limitation upon legislative authority can exclude anything to which the authority extends from the grasp of the taxing power, if the Legislature, in its discretion, shall at any time select it for revenue purposes.” ‘Cooley, Tax. (2d ed.) p. 5. “The power to impose taxes is one so unlimited in force and so searching in extent that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. It reaches to every trade or occupation; to every object of industry, use or enjoyment; to every species of possession; and it imposes a burden which, in case of failure to discharge it, may be followed by seizure and sale or confiscation of property.” Cooley, Const. Lim. (6th ed.) 587. The court then said: “The subject-matter of this statute comes, we think, within the general lawmaking power of the Legislature, and, if there be any limitation forbidding the exercise of such power in that respect, it must be found in the Constitution. But there is none. Our Constitution specially provides that the Legislature shall have power to tax privileges in such manner as may be deemed proper. It also authorizes the Legislature to delegate the taxing power to towns and cities of the State to the extent necessary for ‘their existence, maintenance and wellbeing.’ Const. 1874, art. 2, § 23; also art 16, § 5. And it has been established by the decisions of the court that the Legislature may delegate to towns and cities the power to tax occupations. Little Rock v. Prather, 46 Ark. 479.” Power to tax occupations for purposes of revenue exists in the Legislature, under the Constitution, else it could not confer same on towns and cities. To hold otherwise would produce an anomalous situation. In reaching the conclusion that the acts impose a privilege tax upon the business of severing timber from the soil for commercial purposes, and that the taxes imposed are not a property tax, Mr. Justice Hart disqualified himself on account of certain of his relatives being largely interested in a lumber corporation, engaged in the business of severing timber from the soil for commercial purposes, and did not participate in that branch of the case. Mr. Justice Wood held to the view that the acts impose a property tax upon the timber, and are void. Both, however, assuming that the statute imposes a privilege and not a property tax, agree with the writer that the acts apply with the same force and effect to individuals as to corporations. The Constitution confers authority upon the Legislature to impose reasonable privilege taxes for the purposes of revenue upon all persons. No distinction is made between corporations and individuals in the clause of the Constitution conferring such power. Under Judge Cooley’s broad declaration of who may be required to pay privilege taxes, approved by this court, there is no escape for individuals, firms, or associations from the effect of the acts embracing them. The question of whether those engaged in the removal of our natural resources for commercial purposes shall be required to contribute to the support of the government is one of legislative policy. Power to compel them to do so was conferred upon the Legislature by the Constitution. The validity of the acts is also assailed upon the ground that they violate the due process clauses of the State and Federal constitutions. We are unable to see wherein they infringe upon these clauses. They are taxation statutes authorized by the State Constitution, and are themselves due process of law. For the error indicated, the decree is reversed and the cause remanded, with directions to proceed in a manner not inconsistent with this opinion. The Chief Justice and Justice Smith uphold the tax as to corporations, hut hold that it is void as to individuals.