Title: Jack Cole Company v. MacFarland

State: tennessee

Issuer: Tennessee Supreme Court

Document:

337 S.W.2d 453 (1960) JACK COLE COMPANY v. Alfred T. MacFARLAND, Commissioner, etc. Supreme Court of Tennessee. June 6, 1960. *454 Maclin P. Davis, Jr., Waller, Davis & Lansden, Nashville, for appellee. George F. McCanless, Atty. Gen., Milton P. Rice and David M. Pack, Asst. Attys. Gen., for appellant. This is a suit to recover $383.78, penalties and interest claimed to be due the complainant as a tax paid under protest. This tax was paid pursuant to Chapter 252, Public Acts of 1959, which was declared unconstitutional and void by the Chancellor and this appeal by the State resulted. It appears that complainant is engaged in the business of transporting freight by motor truck in interstate commerce. Its activities in Tennessee are exclusively in interstate commerce and it has never paid corporation excise or franchise taxes under Chapters 27 and 29, Title 67, Tennessee Code. The complainant realizes net earnings from transporting freight in Tennessee in interstate commerce. After the enactment of Chapter 252, Public Acts of 1959, the State demanded the sum of $383.78, penalties and interest. On October 15, 1959, the complainant paid the tax, penalties and interest to the defendant under protest and then brought this suit for the recovery of the amount so paid as authorized by Section 67-2305, T.C.A. conceiving said assessment and collection to be unjust and illegal on the ground that said statute is unconstitutional and void. The complainant claims that under Article II, Section 28, of the Constitution of Tennessee, all property must be taxed according to its value, and taxes must be equal and uniform throughout the State. The only exceptions relate to privilege taxes on income derived from stocks and bonds that are not taxed ad valorem. It is contended that a tax purporting to be on the privilege of owning property or deriving income from property is, in substance and effect, a property tax and not a privilege tax within Article II, Section 28. The statute under which the tax here involved was assessed and collected provides in part as follows: *455 It appears from the foregoing quotation that the tax levied by Chapter 252 of the Public Acts of 1959 undertakes to place a tax on income on net earnings in Tennessee, and complainant contends that said Chapter 252 seeks to impose a tax not authorized by but in violation of Article II, Section 28, of the Constitution of Tennessee. The particular portion of Section 28, Article II, involved is as follows: In the leading case of Evans v. McCabe, 164 Tenn. 672, 678, 52 S.W.2d 159, 160, the Court stated: The defendant contends that the tax is a privilege tax because the Legislature has designated the receipt or realizing of earnings or income as a privilege. Defendant cites numerous cases supporting the contention that the Legislature can name anything to be a privilege and then tax it. It cannot be denied that the Legislature can name any privilege a taxable privilege and tax it by means other than an income tax, but the Legislature cannot name something to be a taxable privilege unless it is first a privilege. In the present case the statute itself provides that the tax shall not be construed as a tax on the privilege of carrying on a business in Tennessee, but expressly provides that the tax shall be upon the privilege or being in receipt of or realizing net earnings in Tennessee, which, it appears to us, is an income tax not authorized by Article II, Section 28 of the Constitution above referred to. Realizing and receiving income or earnings is not a privilege that can be taxed. Since the right to receive income or earnings is a right belonging to every person, this right cannot be taxed as privilege. It results that we find no error in the decree of the Chancellor holding the Act in question invalid and it is affirmed.