1. Upon review of a decision of a state court construing the
state law as denying the relief sought by the appealing party even
if the particular state statute attacked by him were assumed to be
invalid, the constitutionality of that statute is not involved in
this Court. P.
273 U. S.
411.
Page 273 U. S. 408
2. A state tax, called a "license" or "franchise" tax, measured
by 1% of the market value of the annual production and imposed, in
addition to general
ad valorem property taxes, on
producers of petroleum only, is not in violation of the Equal
Protection Clause of the Fourteenth Amendment, even if itself a
property tax, since a separate classification of petroleum
producers for tax purposes is not palpably arbitrary or
unreasonable. P.
273 U. S.
412.
3. The Fourteenth Amendment does not require uniformity in
taxation or forbid double taxation. P.
273 U. S.
413.
208 Ky. 64 affirmed.
Error to a judgment of the Court of Appeals of Kentucky which
reversed a judgment in mandamus commanding Shanks, as Auditor of
Public Accounts, to issue a warrant for a refund of taxes to the
plaintiff oil company.
MR. JUSTICE STONE delivered the opinion of the Court.
The Swiss Oil Corporation, plaintiff in error, instituted a
mandamus proceeding in the Circuit Court of Franklin County,
Kentucky, to compel the state auditor, the defendant in error, to
issue a warrant for the refund of taxes alleged to have been
illegally assessed against it on the ground, among others, that the
taxing statute was repugnant to the Constitution of the United
States. This is the appropriate procedure, under the state law, for
compelling a return to the taxpayer of taxes improperly collected.
Section 162, Carroll's Ky.Stat. 1922;
Craig, Auditor v.
Renaker, 201 Ky. 576.
Page 273 U. S. 409
The trial court gave judgment for plaintiff, which was reversed
on appeal to the Court of Appeals of Kentucky, 208 Ky. 64. The case
comes here on writ of error. Judicial Code, § 237.
Plaintiff is engaged in producing crude oil in Kentucky and
delivering it to pipelines for transportation to points outside of
the state. The tax in question was levied for the period from
March, 1922, to February, 1924, pursuant to the Act of March 29,
1918, c. 122, Acts 1918, p. 540, which requires those "producing
crude petroleum oil" in the state to pay "in lieu of all other
taxes on the wells producing said crude petroleum" an annual tax
"of one percentum of the market value of all crude petroleum so
produced." Section 3 of the Act provides:
"The tax hereby provided for shall be imposed and attach when
the crude petroleum is first transported from the tanks or other
receptacles located at the place of production."
By other sections, those engaged in the business of transporting
oil are required to report to the tax officials the amount of oil
transported by them and to pay the tax, and they are authorized to
collect the amount of the tax from the producer either in money or
crude petroleum. This Act, as stated in its title, is an amendment
and reenactment of the Act of May 2, 1917, c. 9, Acts 1917, p. 40,
which similarly required oil producers to pay in lieu of other
taxes a "license" or "franchise" tax for the "right or privilege of
engaging in such business" within the state. The producers
themselves, under the 1917 Act, were required to pay to tax and to
report the amount of the oil produced to the State Tax Commission
on the 1st day of July of that year and at the end of each
succeeding three months. The taxpayer was entitled, under the 1917
Act, to notice of the valuation placed by the Commission upon the
oil produced, and had 10 days from the time of receiving notice to
go before the Commission and contest the valuation. He was
privileged to
Page 273 U. S. 410
introduce evidence, and the Commission was authorized, after a
hearing, to change the value set for taxation purposes upon the oil
produced.
This Act, as amended, was construed by the Kentucky Court of
Appeals, in an earlier decision.
Raydure v. Board of
Supervisors, 183 Ky. 84. It there held that the legislature
had no power under §§ 171 and 172 of the state constitution to
substitute the production tax authorized by the Act of 1917 as
amended by the Act of 1918 for the
ad valorem method of
taxing oil producing property required by the constitution, nor to
exempt such property from
ad valorem taxation. Following
this decision, the wells and oil producing property of plaintiff
and others have been subjected to state, county, and local
ad
valorem taxes in addition to the production tax imposed upon
plaintiff.
Plaintiff, in the state court, drew in question the validity of
the Act of 1918 as thus construed under the Kentucky Constitution.
It contended that, if construed as imposing a license tax, the
statute was unconstitutional in attempting to substitute an
occupation for the
ad valorem tax required by § 172 of the
state constitution. The main contention, however, was that the tax
in substance was a property, and not a license, tax, and hence
invalid under § 171 of the state constitution, requiring uniform
taxation, since oil properties were subject to two property taxes,
whereas other classes of property were subject to but one. These
contentions, translated into terms of the federal Constitution,
were urged below and renewed here.
It is argued (a) that the Act of 1918, as construed and
administered by the state authorities, imposes double taxation upon
the plaintiff not put on other classes of property, thus denying
the equal protection of the laws guaranteed by the Fourteenth
Amendment; (b) that it authorizes a tax upon interstate shipments,
thus interfering with interstate commerce in violation of Art.
I,
Page 273 U. S. 411
§ 8 of the federal Constitution; (c) that the tax is assessed
and collected without notice and without opportunity to the
taxpayer to be heard, in violation of the due process clause of the
Fourteenth Amendment.
The court below upheld the tax as a license or production tax
valid under the laws and Constitution of Kentucky notwithstanding
the imposition of a separate
ad valorem tax upon the oil
producing lands or leases. It disposed of the objections to the tax
under the federal Constitution, saying:
"Each of these criticisms is leveled at, and can affect only,
the amendment of 1918, and there is, and could be, no criticism of
the title of the original act passed in 1917, or any claim that it
imposed any burden upon interstate commerce, or that it did not
afford the taxpayer ample opportunity to be heard before the tax
attached."
"The original act imposes, just as does the amendment, a
graduated occupational tax measured by the amount of business done
by each and every oil producer in the state. The amendment is
simply a reenactment of the original act, with the latter's
administrative features so changed as to make the collection of the
tax both more certain and less burdensome upon the taxpayer and the
assessing and collecting officials. If any or all of the above
contentions are sound, the amendment would be destroyed, but this
would leave the original act in force and unamended. Precisely the
same tax would have been collected from oil producers in either
event."
The court also pointed out that, as this is a proceeding by a
taxpayer for a refund of taxes under a statute which permits the
refund only if the taxes paid were not due, there could in any
event be no recovery by the plaintiff, since the tax, if not due
under the Act of 1918, was due and payable under the Act of
1917.
As the case is brought here from a state court, the construction
put by the court below upon the statutes
Page 273 U. S. 412
and Constitution of its own state is not open to review here.
Southwestern Oil Co. v. Texas, 217 U.
S. 114,
217 U. S. 119;
Brown-Forman Co. v. Kentucky, 217 U.
S. 563,
217 U. S. 569.
Since the Kentucky Court of Appeals has held that the plaintiff is
not entitled under the state law to the relief prayed, even if the
Act of 1918 be deemed invalid, no questions as to the validity of
that act under the federal Constitution is presented for decision
on this record.
But plaintiff argues that this determination of the state court
presupposes the validity under the federal Constitution of the Act
of 1917, which has the same vice as the later act. It is contended,
as it was of the Act of 1918, that the one percent production tax
imposed is, in effect, a property tax. Since the Constitution of
Kentucky, as construed in
Raydure v. Board of Supervisors,
supra, does not admit of the substitution of a production tax
for an
ad valorem tax, and requires the latter to be
levied in addition to the production tax, there is therefore double
taxation not imposed on other classes of property, and hence a
denial of the equal protection of the laws guaranteed by the
Fourteenth Amendment.
We are unable to distinguish the Act of 1917 in its
constitutional aspects from the statute of Kentucky imposing a
license tax at the rate 1 1/4 cents per gallon upon those engaged
in the business or occupation of rectifying or blending spirits,
considered by this Court in
Brown-Forman Co. v. Kentucky,
supra. There, the tax imposed was assailed on the ground that
it was a property tax not assessed upon similar classes of property
whether produced within or without the state, and that its
imposition resulted in a denial of the equal protection of the
laws. But this Court, accepting the state court's interpretation of
the tax as a license tax, upheld the statute as based upon a
classification which was neither arbitrary nor unreasonable, saying
that the reasonableness of the classification was the ultimate
question
Page 273 U. S. 413
to be determined, whether the tax be regarded as a license or a
property tax (p.
217 U. S.
571).
See also Southwestern Oil Co. v. Texas,
supra, where an occupation tax upon wholesale dealers in coal
and other mineral oils was upheld despite the fact that wholesale
dealers in other commodities were not similarly taxed.
Without a labored analysis of the nature of the taxing measure,
we see no reason for not accepting the interpretation of the state
court that this statute authorizes a license tax to which there can
be no serious constitutional objection.
Texas Co. v.
Brown, 258 U. S. 466,
258 U. S. 481;
Bowman v. Continental Oil Co., 256 U.
S. 642,
256 U. S. 649;
cf. Watson v. State Comptroller, 254 U.
S. 122. But even if regarded as a property tax, it is
imposed alike upon all crude oil produced within the state, and
there is nothing in the record to suggest that the classification
is so palpably arbitrary or unreasonable as to render it invalid.
Unlike the state constitution,
Dawson v. Kentucky Distilleries
Co., 255 U. S. 288;
Greene v. Louisville & Interurban R. Co., 244 U.
S. 499, the Fourteenth Amendment does not require
uniformity of taxation,
Davidson v. New Orleans,
96 U. S. 97,
96 U. S. 105,
nor forbid double taxation,
St. Louis, S.W. Ry. v.
Arkansas, 235 U. S. 350,
235 U. S.
367-368;
Shaffer v. Carter, 252 U. S.
37,
252 U. S. 58;
Fort Smith Lumber Co. v. Arkansas, 251 U.
S. 532,
251 U. S. 533;
cf. Fidelity & Columbia Trust Co. v. Louisville,
245 U. S. 54,
245 U. S. 58;
Cream of Wheat Co. v. Grand Forks Co., 253 U.
S. 325;
Citizens' National Bank v. Durr,
257 U. S. 99,
257 U. S. 109.
It is sufficient, as stated, that there be some adequate or
reasonable basis for the classification.
Kidd v. Alabama,
188 U. S. 730,
188 U. S. 733;
Watson v. State Comptroller, supra, 254 U. S.
124-125;
Maxwell v. Bugbee, 250 U.
S. 525,
250 U. S. 540;
Northwestern Life Ins. Co. v. Wisconsin, 247 U.
S. 132,
247 U. S. 139;
Courter v. Louisville & Nashville R. Co., 196 U.
S. 599,
196 U. S.
608-609. The particular classification adopted "is not
open to objection unless it precludes the assumption that [it]
was
Page 273 U. S. 414
made in the exercise of legislative judgment and discretion."
Stebbins v. Riley, 268 U. S. 137,
268 U. S.
143.
Judgment affirmed.