Court Opinion

ID: 3553602
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:05:25.176077+00
Date Added: 2024-06-11T13:46:03.950764
License: Public Domain

If the statute imposes a sales tax, I agree with the Chief Justice that it is void because it creates an improper classification. His opinion follows the judicial theory of classification consistently held in New Hampshire for over a hundred years. I see no reason to depart from that theory, particularly since the people have acquiesced in it for several generations. The theory has been freely criticized by some, but the people have never indicated any *Page 132 
desire to repudiate it by exercising their undoubted privilege of writing into the Constitution by amendment such words as they please. Until the implied will of the people changes, I think we must adhere to long-accepted interpretations.
I think also that the statute is void as an attempt to levy a disproportional tax. The reasons for the thought involve a statement of the nature of property taxes.
Property may be taxed in two distinct ways. Ever since 1784 it has been permissible to tax property because of its existence in the hands of somebody. The resulting levy we commonly call "the general property tax." It depends upon ownership or possession. It is levied upon the owner or possessor of the property at fixed annual intervals. It is measured by the "full and true value" of the property in money. An estimation of value is required in its assessment. The estimation must be related to salable or marketable value. Cocheco Mfg. Company v. Strafford, 51 N.H. 455, 482. "Such value is the market value, or the price which the property will bring in a fair market, after reasonable efforts have been made to find the purchaser who will give the highest price for it." Winnipiseogee c. Co. v. Gilford, 67 N.H. 514, 517. While "true value" thus has relation to a "selling price," it is not to an actual selling price, but to a presumptive one, "the usual selling price." It is not what the property has brought, but what in the nature of the case it probably would bring, if sold. And this is true equally whether the property is real estate inherited from a long line of ancestors, never sold and not on the market, or whether it is a commodity held in stock in trade with the intention of selling.
The "general property tax" must be proportional. That means that in the same taxing district values assessed must be equal, and the rate the same. So the rule of proportion requires that comparable values and the same rate shall be applied to cattle, stocks in trade, real estate and all other property. And the same rate and basis of valuation must be applied to all commodities held in possession for sale. Since the "general property tax" is laid only once each year, on April 1, and the valuation is of that date, the fluid character of stocks in trade requires their valuation as of the average throughout the year, whereas the static character of other property makes the ascertainment of value on April 1 sufficient as a measure. Equality and proportion as between two uses of property are thus attained.
Since 1903 another form of taxing property has been permitted. *Page 133 
But this form of tax is not levied upon the property because of its existence in ownership or possession (because it is property in hand). Unlike the "general property tax" it is not incident to the status of the property as something in being, but to some happening or event with respect to the property. Such an event may be the passing of property by will or inheritance (the legacy and succession tax). Or it may be the passing of income from debtor to creditor and from corporation to shareholder (the interest and dividends tax), or, if the legislature willed, other forms of income, including the passage of salaries and wages. Or it might be the passing of property by sale from wholesaler to retailer or from retailer to consumer.
Such distinctive taxes, incident to the happening of an event (the passing from hand to hand) rather than to the existence of the property (in hand), need not be proportional to the "general property tax." That is, they may be assessed at a different rate and at different times. (But, as the Chief Justice has shown, a retail sales tax must operate alike on all retail sales which cannot be distinguished upon reasonable and just grounds).
The two forms of tax differ in the time of application and the measure applied. The "general property tax" is applied at a fixed annual date, though collected later; the sales tax is applied when the sale happens, though typically it also is collected later. The "general property tax" is recurrent. A given sales tax never recurs, since a given sale happens but once. The measure also differs. The measure of the "general property tax" is "true value," which is synonymous with a presumptive sales value estimated with respect to the mere assumption of a sale which may never occur. The sales tax is measured by no presumptive or even probable test, but by the realistic test of what the property has actually brought. The distinctions as to time and measure have heretofore been brought to the attention of the legislature. Opinion of the Justices, 77 N.H. 611, 621. These distinctions are so clear and simple that it is easy for the legislature to enact a sales tax if it chooses. Has the legislature, in this instance, indicated the intention to lay a tax on the sales of tobacco products? In my opinion, the contrary is true.
The statute is entitled "An Act To Eliminate the Direct State Tax on Real Property by Means of a Tax on Tobacco Products." This suggests no more than the displacement of a part of the "general property tax" by a tax of the same order or character. If a sales tax had been intended, the apt title would have ended with the words "a Tax on the Sales of Tobacco Products." *Page 134 
The preamble also is significant. It recites that the direct State tax can be eliminated by "a levy upon tobacco products at the rate of fifteen per cent of the retail selling price, which among other results will impose a tax of one cent on each ten cigarettes." The "retail selling price" may, as already seen, be the measure of a retail stock in trade tax. So far, then, we have no evidence of a clear intention to levy a tax upon the actual receipts from sales, which is the only measure of a sales tax. On the contrary, the definitely expressed intention is to levy one cent upon every ten cigarettes, without respect to their actual sale, but merely with respect to their being on hand with the purpose of sale.
The act provides (Section 5): "A tax is hereby imposed at the rate of fifteen per cent upon the value of all tobacco products sold at retail." So much of the act, and so much only, might point to an intention to levy a sales tax. But the administrative provisions negative the intention. It would have been easy to provide administrative features consistent with a sales tax, but this was not done.
Quite to the contrary, the administrative provisions point to a tax upon tobacco products in hand. Payment of the tax is "evidenced by affixing stamps to the smallest packages containing the tobacco products." These stamps must be purchased in advance from the tax commission, either for cash or upon credit secured by a bond (Section 7). Instead of that, a metering machine may be used, but set for a certain number of cancellations for which advance payment is made or credit is secured (Section 8). Distributors must affix the stamps before sale (Section 11). Retailers must affix them within twenty-four hours after coming into possession of unstamped property (Section 12), without reference to the time when, if ever, the property is sold.
The result is that the tax is levied and collected before sale and as a matter of possession in hand rather than as an incident to the passing from hand to hand by sale. A dealer in tobacco products pays the tax upon goods held in possession, for sale, it is true. Prior to the passage of the act, he paid a "general property tax" upon the goods thus held. The incidence is of the same character as before. There are, to be sure, two distinctions. (1) The measure is on every item taken into stock, not the average value of the stock held. (2) The rate is several times that formerly applied. Viewed as a tax upon property in hand, the tax is highly disproportional on both accounts.
The measure of value directed by the act is of first importance in *Page 135 
arriving at the legislative intention. Section 5 makes the "value of all tobacco products sold" equivalent to "the usual selling price." "Usual selling price" is defined by Section 1 as "the normal retail selling price of tobacco products as determined by the tax commission." This makes the commission the assessors. But the assessors are circumscribed by the act in the process of valuation. They are directed to consider "the generally established price of tobacco products at retail stores in this state for a period of at least two years before such determination, and the wholesaler's price, usual dealers' profit, and advertised prices both within and without the state." A "generally established price . . . at retail stores" is a good measure of "the true value" (the presumptive selling price) of retail stock in hand, but infirm as a measure of receipts gained in the passing from hand to hand by sale. Moreover, the application of a two-year test, ignoring market changes, might tend to inaccurate valuation, particularly as to actual sales receipts. "The wholesaler's price" and the "usual dealers' profit," if placed together in proper balance, might be of use in valuing property in hand, though neither alone would be of much help for any purpose. "Advertised prices" within the state would be of some aid in establishing values in hand, but not for determining the value of actual sales. It is difficult to see how "advertised values without the state" could be more than remotely helpful in any event.
But the real object of the act is most clearly gathered from the mandate to the tax commission to consider "cut-rate" prices and quantity discounts allowed by retailers as evidence that the "usual selling price" is higher than such "sale" or bargain prices. Let us see where this leaves the "cut-rate" dealers. A real sale is a "sale" only in name. No fact ascertained from the happening of a sale is the test and measure of the tax, but something else. The tax, the act says, is to be measured precisely as property in possession is measured — by a presumptive, not an actual sales price. For purposes of the tax certain ideal sales, at the highest price only, are to be considered. A mass of actual sales at lower prices is to be totally ignored. Thus is attained the object declared in the preamble, to lay "a tax of one cent on each ten cigarettes." The measure, it cannot too often be repeated, is the measure of property in hand, and not the measure of its sale.
This intention is not negative; it is perfectly expressed. We cannot blink the fact that the act calls for a levy of fifteen per cent of a presumptive sales value (the measure of a "general property tax"), *Page 136 
not for one of fifteen per cent of the actual sales value (the measure of a sales tax). The legislature exhibited full knowledge of the fact known to all that there is often a real difference between the "usual sales price" as they carefully defined it and the true selling price. In deliberately choosing the former rather than the latter as the measure, they established their determination to levy a tax in the nature of one on property in possession, instead of a sales tax.
The clear incidence of the tax, both as to measure and as to time, is on property in hand. It is paid before sale, and its payment is evidenced by stamping before sale, sometimes long before sale. Yet the goods may never be sold at all. They may be stolen; they may be destroyed by fire or flood. Yet, though never sold, they have been taxed irrevocably. This result is not altered by the provision in Section 9 for the redemption of "unused, uncancelled" stamps. All packages must be stamped within twenty-four hours after they come into the hands of retailers. There is no warrant for supposing that a stamp is unused and uncancelled after it is affixed. Nor can it be supposed that a stamp affixed to a package stolen or destroyed can be redeemed by the taxpayer. The tax is irrevocably paid when the stamp is affixed.
The factual situation is too clear to admit of doubt or to be glossed over. The statute does not provide for a sales tax, but for a disproportional tax on goods in ownership and possession.
But even if this were a sales tax, even if it were properly classified, the tax would be unequal in its rate. I cannot overlook the fact so firmly seated in the minds of the legislators, that many dealers sell cigarettes at twelve and a half cents a package, while others sell at fifteen cents, nor the fact that the tax clearly contemplated is two cents a package, whichever price is received. On the "cut-rate" basis, the "sales tax" would be at the rate of sixteen per cent. On the "usual selling price" basis, it is thirteen and one third per cent. Sales on either basis are legal. There could be no just cause for discrimination between those who sell for one price and those who sell for another. If a sales tax was intended, we should have to conclude that the legislature knowingly set up the fiction that all sell at the "usual selling price"; that they knew that the contrary was true, and carefully met the situation by definitely excluding any consideration by the assessors of facts contrary to the fiction. That is, that they intended to levy a sales tax deliberately unequal. The inequality and discrimination would be in nowise separable from such a legislative scheme, and the whole scheme would have to fall *Page 137 
because of them. I do not think that the legislature intended to adopt any fiction of the sort. What they intended was a tax of two cents on every package in retail stock.
If the tax is one on property in possession, as I believe, it is disproportional and invalid. If it is a sales tax, as I cannot believe, it is invalid for innate and inseparable inequality and discrimination. It cannot be sustained upon any test known to our constitutional theory.