Court Opinion

ID: 3269209
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:37:35.932952+00
Date Added: 2024-06-11T07:41:18.568156
License: Public Domain

There was passed at the 1933 session of the General Assembly (Acts 1933, page 203) act 72, entitled, "An Act to Create a Fact-Finding Tribunal in the Corporation Commission." This tribunal was given the power, and it was made its duty, to investigate and make a finding of all facts entering into or forming the basis of rates to be charged for any service supplied by any public utility "furnishing gas, water, *Page 684 
light, heat or power; producing, generating, transmitting or distributing gas, water, light, heat or power; or furnishing telephone, telegraph or street railway service."
To raise funds to defray the expenses of this tribunal, it was provided, in 8 of the act, that each public utility subject to the provisions of the act shall file with the tribunal "a sworn statement showing its gross earnings from property in this State for the preceding calendar year, and at the same time shall remit to the State Treasurer the sum of $2 for each $1,000 of such gross earnings as a fee for the fact-finding facilities afforded by this act, which fee shall be in addition to all property, franchise, license or other taxes, fees or charges now or hereafter prescribed by law. * * * The tribunal is hereby authorized to inspect the income tax return of any public utility for the purpose of checking up its gross earnings."
The Fort Smith Gas Company is engaged in the distribution of natural gas in the city of Fort Smith. The gas which it distributes is purchased from various pipe line companies. As required by the act from which we have quoted, the Fort Smith Gas Company made report of its gross earnings for the year 1932, from which it appeared that gas which had been furnished by the pipe line companies to the Fort Smith Gas Company at a cost of $214,769.01 had been distributed to the consumers for the price of $407,588.83. The Fort Smith Gas Company reported its gross earnings to be the difference between what it had paid for the gas and the price received for it, and made a tender of the tax imposed by 8 of the act on that basis. The tender was declined by the Commissioner of Revenues, who insists that the tax should be paid on the whole amount for which the gas was sold, and not on the difference between the purchase price and the sale price. The court below sustained that contention, and entered a judgment accordingly, from which is this appeal.
As appears from the facts stated, the question presented for decision is whether the term "gross earnings" *Page 685 
should be construed as being synonymous with the term "gross receipts."
The question here presented was thoroughly considered by the Court of Appeals, of the District of Columbia in the case of District of Columbia v. Georgetown Gaslight Co., 45 Appeal Cases Dist. of Columbia, page 63. An act of Congress directed the collector of taxes of the. District of Columbia to collect a tax on the gross earnings of banks, electric lighting, telephone, and gas companies doing business in the District of Columbia. The act required all street railway companies to pay a tax on their gross receipts, and insurance companies to pay on their gross premium receipts. The Georgetown Gaslight Company filed a report with the assessor of the district showing its gross earnings to be $97,719.58, and the assessor called upon the company for a statement as to how it arrived at the sum returned. The company furnished a statement showing that the total sales from gas and its byproducts were $160,939.99, and the cost of the raw material actually entering into the manufacture of the gas was $63,220.41, and that by deducting the cost of the raw material from gross receipts the company found and reported its gross earnings as $97,719.58, which was refused.
A demurrer was filed, which presented to the trial court the question whether the Gas Company should have been allowed the deduction of the cost of the raw material used in the manufacture of the gas in determining what were its gross earnings. The District of Columbia appealed from a ruling favorable to the Gas Company, and the synopsis of the brief filed by its counsel on its appeal to the Supreme Court of the District of Columbia indicates that an exhaustive investigation of the authorities had been made, and the opinion on appeal showed the cases cited were carefully considered and properly distinguished.
It was insisted there, as it is here, that gross receipts and gross earnings are in a broad sense equivalent terms, and that a tax on gross earnings and on gross receipts is one and the same thing. *Page 686 
It was pointed out in the opinion cited that with certain sorts of business concerns gross earnings and gross receipts constitute precisely the same sum of money, and it was there said that: "A railroad company engaged entirely in the rendition of services for which it received compensation, and neither producing nor furnishing any tangible commodity to persons as an incident to the rendition of the services, may have as its `gross receipts' and its `gross earnings' precisely the same moneys." But it was pointed out very clearly that it would be all economic fallacy to assert their identity in all cases or in any case where the revenue or income was derived from purchases and sales or from manufacturing and selling. There the taxpayer manufactured and sold gas, and it was there said: "It is engaged in selling a commodity, gas, which it produces by processes of manufacture by converting raw materials which have been purchased by money from its capital and its net surplus of earnings of former years which has been added to its capital. Large sums are used to buy those raw materials; and when the gas which is made from them is sold, there comes back to the company as a part of the money received from such sales the capital used in the original purchase of raw material, and when it thus comes back to the company it is returned to capital." This is equally true of gas bought and resold as in the case before us.
Among numerous other cases there cited and quoted from was the case of People ex rel. Brooklyn Union Gas Co. v. Morgan, 114 A.D. 266, 99 N.Y.S. 711, where, upon facts identical to those involved in the District of Columbia case, the Supreme Court of New York, in the Appellate Division, said: "The comptroller has thus fixed the tax, not on the `gross earnings' of the relator, as required by the statute, but on its gross receipts. Capital of a corporation which must first be invested before it begins to earn anything cannot be said to be a part of the earnings of such corporation merely because it is turned into cash, and thus in one sense becomes a receipt of the corporation. Earnings do not include *Page 687 
capital, but are the productions or outgrowth of capital."
If the gas was not sold for something more than its cost, there would be "gross receipts," but not "gross earnings." If sold for more than it cost, the difference between the cost price and the sale price would be the gross earnings. If, for any reason, it was important to determine, as would be necessary in an income tax return, what the net earnings or net profits were, it would be necessary to know what the operating expenses had been, and to deduct these also.
If a merchant buys goods for a thousand dollars, and sells them for two thousand dollars, the gross receipts would be two thousand dollars, but his gross earnings would be only one thousand dollars, and his net profits or net earnings would be this thousand dollars less the operating expenses, and this is as true of gas as it is of goods or other merchandise.
These terms are explained and defined in our Income Tax Act (act 118, Acts 1929, vol. 1, page 573), under which income tax returns are made, to which the Fact-Finding Tribunal is given access by 8 of the act of 1933 for the purpose of checking up the gross earnings of the utilities subject to the tax there sought to be collected. See also Sims v. Ahrens, 167 Ark. 557, 271 S.W. 720.
There is nothing to indicate that the General Assembly did not use the term "gross earnings" in the sense in which it is ordinarily employed and as ordinarily understood, and, if this is true, it cannot be interpreted as meaning the collection of invested capital used to purchase an article bought for resale, which it would be if the Gas Company is required to pay a tax on the purchase price of the gas which it bought to distribute and resell.
The case of Railway v. Shinn, 52 Ark. 93,12 S.W. 183, is cited as holding to the contrary. But such is not its effect. There a short line railroad operating between two towns only a few miles apart agreed to pay the operator of a ferry, which the railroad was required to use, one-fifth of the actual gross earnings of the railroad *Page 688 
as ferriage. It was held that the railroad should pay the sum agreed without deduction for hack fare incurred in completing a journey between the two towns. In other words, the operating expense could not be considered in determining the gross earnings. The Gas Company here asks no deduction for operating expenses, but has offered to pay on its gross earnings without credit for that expense.
It will not do to say that the Legislature said one thing, but meant another. We must ascertain the legislative intent from the language employed. Act 493 of the Acts of 1921 (General Acts 1921, page 472), imposing a tax on the gross receipts of certain insurance companies, clearly indicates that when the General Assembly wishes to tax gross receipts, it says so, and we may not interpolate that intention when the language employed indicates an intention to the contrary.
We conclude therefore that the State Revenue Commissioner should have accepted the tender made by the Gas Company in payment of the tax on its gross earnings.
This opinion, when delivered, expressed the views of the majority of the court as it was then constituted. Through a change in the personnel of the court, it does not express the views of the majority of the court as now constituted. It is therefore no longer the opinion of the court. But, inasmuch as it does express the views of Justices McHANEY, BUTLER and myself, the remaining members of the court who originally made it, it is now filed as a dissenting opinion.