Court Opinion

ID: 4004820
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:05:58.068636+00
Date Added: 2024-06-11T12:49:00.738610
License: Public Domain

By a final decree entered by the Circuit Court of Ohio County in a chancery cause in which the plaintiff sought to enjoin the Tax Commissioner of this State from the collection of certain taxes, the injunction was denied and the bill of complaint dismissed. On application of the plaintiff we awarded this appeal.
Minnie E. Wilson in her lifetime did business under the style of "Uwanta Toilet  Towel Supply". The bill describes this business as follows:
    "The principal place of business of the plaintiff is located at 309 Kenney Street, in the City of Wheeling, Ohio County, West Virginia. Plaintiff's said business consists in providing a linen and towel supply service by delivering to various customers in the State of West Virginia and in the State of Ohio clean towels, linen aprons, coats, and similar articles of wearing apparel which, after use, are collected by the plaintiff's employees and returned to plaintiff's place of business for laundering and preparation for re-delivery to customers. The linen and towels are owned by the plaintiff and the laundering of them is performed at the plaintiff's said place of business in the City of Wheeling. The plaintiff charges her various customers a fee for the use of the clean linen and towels.
    "In order to facilitate collection of plaintiff's linen and toweling from and delivery to her customers in and near the City of Steubenville, in the State of Ohio, the plaintiff has established a branch depot in that city. The linen and toweling delivered from plaintiff's said Steubenville depot is laundered at her place of business in the City of Wheeling, forwarded to her depot at Steubenville and delivered from said depot to plaintiff's various customers in the State of Ohio. *Page 709 
The charge for the service is made to the Ohio customers the same as to the West Virginia customers, the billing being performed at the Wheeling office and payments being made to plaintiff's agents at the Steubenville depot and there deposited to her credit in a Steubenville Bank. After the towels and linen are used in the State of Ohio, they are collected by plaintiff's employees and returned to the Wheeling office for laundering and preparation for further service. The only marking placed on plaintiff's toweling and linen is the plaintiff's own trade name and the customers do not always receive for use the same items of toweling and linen.
    "In addition to deliveries to plaintiff's customers in and near the City of Steubenville, performed in the manner aforesaid, the plaintiff also provides its service to certain customers in and near the Cities of Martins Ferry, Bridgeport and Bellaire, in the State of Ohio, deliveries being made to the latter customers directly from the plaintiff's place of business in the City of Wheeling."
The bill further shows that, by notice dated August 7, 1940, the Tax Commissioner made a supplemental assessment of taxes against the plaintiff for the privilege of continuing in, and carrying on, her business in the State of West Virginia during the years 1936 to 1938, both inclusive. This additional levy for these years was for the sums of $157.33, $168.94 and $155.65, respectively, and was based upon the proceeds of business done by the plaintiff with customers in the State of Ohio, which had been omitted from the returns made by her, on which her tax for the privilege of carrying on the business within this State was based. The bill prayed for an injunction against the collection of these additional taxes.
The Tax Commissioner demurred to the bill of complaint on the grounds that the tax was assessed for carrying on a "service business or calling" in this State; that the service rendered was exclusively in this State and is taxable as a local activity; and that the taxes levied are *Page 710 
for the privilege of conducting this business and not on the business itself, and therefore does not burden interstate commerce. A short, formal answer was also filed which does nothing but raise the same legal questions which are involved in the demurrer. The cause was submitted on bill, demurrer and answer, resulting in the final decree as above noted.
Pending the suit the original plaintiff died and the cause was revived in the name of her personal representative; and upon the expiration of the term of office of the then Tax Commissioner, the suit was revived in the name of his successor.
The statutory provisions involved are the following sections of Chapter 86 of the Acts of the Legislature of 1935:
    "Sec. 2. There is hereby levied and shall be collected annual privilege taxes against the persons, on account of the business and other activities, and in the amounts to be determined by the application of rates against values or gross income as set forth in sections two-(a) to two-(i) inclusive, * * *
    Sec. 2h. Upon every person engaging or continuing within this state in any service business or calling not otherwise specifically taxed under this act, there is likewise hereby levied and shall be collected a tax equal to one per cent of the gross income of any such business.
    "Sec. 2i. Upon every person engaging or continuing within this state in the business of collecting incomes from the use of real or personal property or of any interest therein, whether by lease, conveyance or otherwise, and whether the return be in the form of rentals, royalties, fees, interest or otherwise, the tax shall be one per cent of the gross income of any such activity. * * *"
The Tax Commissioner asserts that the business for which these additional assessments were made was a "service business or calling" as defined in Section 2h, *Page 711 
and that this business must be considered as having been carried on exclusively in this State; while the plaintiff insisted that her business was that of "collecting incomes from the use" of personal property as specified in Section 2i, and, further that even if her business is to be considered a "service business", the part thereof which was done with customers in Ohio was interstate commerce and cannot be included in her gross income for the purpose of calculating her tax for the privilege of carrying on business within this State.
The question in issue, as we conceive it, thus becomes narrow and relatively simple. We cannot adopt the view that the business of the plaintiff was simply, or chiefly a "service" to her customers. Certainly the laundering of the linen and other articles was not the real object of the contract between the furnisher and the customers. It is difficult to perceive how the customers had any interest whatever in the renovating of these soiled articles. It mattered nothing to them whether the reclaimed linen and other articles were ever laundered, or ever put to any further use. The customers were not entitled to receive back the identical articles which they had used, and, in fact, would receive them again only as a coincidence. The customers' sole right was to have clean articles for use. They had no interest whatever in the articles before they were delivered or after they were reclaimed. The laundering of these articles was no more a service to the customers than a like cleaning and preparing of ordinary commercial commodities for sale such as vegetables or fruits, or in the conditioning of automobiles, carriages, teams or pianos, and other like chattels kept for hire, which require a substantial amount of repeated labor to restore them to a condition suitable for use.
There was, of course, a certain amount of service in the delivery of the plaintiff's linen and towels to her customers and possibly some vestige of service in removing them from the user's premises, but this service does *Page 712 
not in the least differ from that which ordinarily attends the everyday retail sale.
The word "service" as used with reference to the plaintiff's business in her bill of complaint, signifies nothing. All public utility concerns are spoken of as public service companies. The public carrying of goods, passengers, messages, and power, and the public furnishing of commodities such as gas, water and electric current are spoken of as rendering a "public service" not only in common parlance but also in law books and in statutes. A vast amount of modern business consists of "service" of this character and includes transactions which are in fact sales, or leases as well as such as are service in the strict and accurate sense of the term. Hence we have concerned ourselves only with the actual character of the plaintiff's business.
On the other hand it is perfectly clear that the dominant feature of the plaintiff's business was a hiring or leasing of the articles furnished and a collecting of income for their use. The bill specifically alleges, and the answer directly admits, that the fee paid to her by her customers was "for the use of the clean linen and towels". But without this formal admission in the record, there could be no question but that the sole interest of customers was in the use of the articles furnished by the plaintiff. It was for this use that they contracted and for this use that they paid. The plaintiff's contract, or obligation, to her customers was completely performed when they were kept supplied with clean articles. Nothing that she did preliminary to delivering such linen and other articles to the customers or after reclaiming them would have constituted a performance, or any part of a performance of her contract, with these users. The use of the articles is all that the customer received, all that he was entitled to claim and all for which he paid. Therefore, the business between the plaintiff and her customers must be treated as a hiring or leasing of chattels, or, in the language of the statute, a "collecting incomes from" the use of personal property. *Page 713 
Gross income from which a tax for the privilege of carrying on a business in this State is computed, cannot include income from interstate business. We consider this proposition settled definitely by the case of Bluefield Produce and ProvisionCompany v. City of Bluefield, 120 W. Va. 111, 196 S.E. 568,569. That case involved an ordinance of the City of Bluefield creating a license tax on all stores operating within the corporate limits of the City, the amount of which was fixed at "one-sixth of 1% of the gross proceeds of sales of such store". We held that:
    "In the administration of an ordinance of a municipality imposing a license tax on the 'opening, establishing, operating or maintaining' of stores therein, based on the 'gross proceeds of sales of such store', sales made from a store licensed thereunder effected by actual delivery to purchasers outside the municipality, and outside this state, may not be included in fixing the gross proceeds of sales from which the tax is computed, the same being in violation of Sections 8 and 10 of Article I of the Constitution of the United States."
This decision is in exact accord with many express decisions of the Supreme Court of the United States. Gwin, White  Prince v.Henneford, 305 U.S. 435, 59 S. Ct. 325, 83 L. Ed. 272; MatsonNavigation Co. v. State Board of Equalization of California,297 U.S. 441, 56 S. Ct. 553, 80 L. Ed. 791; Cooney v. MountainStates Telephone  Telegraph Company, 294 U.S. 384,55 S. Ct. 477, 79 L. Ed. 934; East Ohio Gas Company v. TaxCommissioner, 283 U.S. 465, 51 S. Ct. 499; 75 L. Ed. 1171;American Manufacturing Company v. City of St. Louis,250 U.S. 459, 39 S. Ct. 522, 63 L. Ed. 1084; Crew-Levick Company v.Commonwealth of Pennsylvania, 245 U.S. 292, 38 S. Ct. 126,62 L. Ed. 295.
It is true that in the Bluefield case only sales in interstate commerce were involved; but the case was decided, not upon the fact that the transactions were sales, but by reason of their being interstate commerce. The word *Page 714 
"commerce" as used in the Constitution of the United States has not a technical, but a practical, meaning. It is in no wise limited to sales, but includes many other dealings between points in different states which produce a movement of goods across state lines. Specifically, it has often been held that the leasing or hiring of chattels which requires their transfer from the owner in one state to the user in another constitutes interstate commerce. James v. United Artists Corporation,305 U.S. 410, 59 S. Ct. 272, 83 L. Ed. 256; Binderup v. PatheExchange, Inc., 263 U.S. 291, 44 S. Ct. 96, 68 L. Ed. 308; UnitedShoe Machinery Corp. v. United States, 258 U.S. 451,42 S. Ct. 363, 66 L. Ed. 708; Johnston v. Lamson Company, 159 Va. 666,167 S.E. 417; State v. Paramount Publix Corp., 178 La. 818,152 So. 534; Houston Canning Company v. Virginia Can Co.,211 Ala. 232, 100 So. 104; General Talking Pictures Corp. v.Shea, 185 Ark. 777, 49 S.W.2d 359; Pauline Oil and Gas Company
v. Mutual Tank Line Company, 118 Okla. 111, 246 P. 851; GeneralTalking Pictures Corp. v. DeMarce, 203 Minn. 28,279 N.W. 750; Hayden v. Dallas County, (Tex.Civ.App.) 143 S.W.2d 990. Our own case of Charleston Transit Co. v. James, 121 W. Va. 412,4 S.E.2d 297, seems by implication to consider the principle of the Bluefield case applicable to a hiring of chattels, as well as to a sale, since the Court found it necessary to determine that the business there considered was neither a sale nor a hiring of chattels in interstate commerce in order to sustain the tax involved. In James v. UnitedArtists Corporation, supra, which involved the statute here under consideration, it was held that the furnishing of moving picture films from without this State to users within this State was interstate commerce and that the income therefrom could not be burdened with the privilege tax sought to be enjoined in the case at bar. We perceive no legal difference between the furnishing of such films across state lines and the like furnishing of linen, towels, and similar articles as in the present case.
The decree of the Circuit Court of Ohio County will be reversed and the cause remanded with directions to enter *Page 715 
a decree in accordance with the views herein announced.
Reversed and remanded.