Court Opinion

ID: 9767559
Source: CourtListenerOpinion
Date Created: 2023-08-29 05:21:27.516775+00
Date Added: 2024-06-11T07:30:31.752739
License: Public Domain

WALKER, Justice.
This is a direct appeal pursuant to Article 1738a.1 Texas Grain Sorghum Producers Board, appellee, brought suit against Conlen Grain and Mercantile, Inc., appellant, to recover the amount of assessments which Conlen, as a “processor” of grain sorghum, was required to collect from grain sorghum producers and remit to the Board under the provisions of Article 55c, referred to by appellee as the Texas Commodity Referendum Act. J. E. Crabtree, the principal stockholder of Conlen and a grain sorghum producer, intervened and is also an appellant here. Conlen and Crab-tree filed a counterclaim seeking a declaratory judgment that the statute is unconstitutional and a permanent injunction restraining the Board from collecting assessments. After a trial before the court without a jury, judgment was rendered: (1) that Conlen and Crabtree take nothing by their suit for declaratory and injunctive relief; and (2) awarding the Board judgment against Conlen for $4,644.02, stipulated to be the amount of the assessments Conlen should have collected and remitted if the statute is valid, plus interest and costs. In our opinion the statute is an unconstitutional attempt to impose an occupation tax on an agricultural pursuit.
The statute sets up a method whereby a nonprofit organization representing the producers of a particular agricultural commodity may petition the Commissioner of Agriculture for authority to conduct a referendum, either on an area or statewide basis, to determine whether the producers of the commodity shall “levy an assessment upon themselves to finance programs authorized by this Act.” Upon being certified by the Commissioner, the petitioning organization conducts a referendum on the proposition of whether the producers “shall levy an assessment upon themselves, not to exceed a rate specified on the ballot, for the purposes stated in this Act” and an election of members to a commodity producers board for the particular commodity. If the proposition is approved by at least two-thirds of those voting in the election, or if those voting in favor of the proposition produced at least 50 percent of the volume production of the commodity during the last relevant production period, the board is established.
The board “is an agency of the state for all purposes” and is charged with the responsibility of formulating and administering programs for the purposes stated in the Act. It is empowered, among other things, to employ personnel, incur expenses to carry out the purposes of the Act, and set the rate of assessment at or below the latest maximum established by a vote of the producers. Assessments are collected by the processor, usually the first purchaser of the commodity for commercial purposes, by deducting the amount thereof from the purchase price. The money thus collected must be remitted by the processor to the board, which may expend the same as it considers proper for the purpose of “developing, carrying out, and participating in programs of research, disease and insect control, predator control, education, and promotion, designed to encourage the pro*622duction, marketing, and use of the commodity upon which the assessment is levied.”
Under the statute as originally enacted in 1967, participation in the program was strictly voluntary. The processor was authorized to collect assessments only from producers who signed participation certificates. A participating producer might withdraw at any time by signing an exemption certificate, and he might also obtain a refund of any assessment paid by making written application within 60 days. The statute was amended in 1969 to eliminate the use of participation and exemption certificates. Participation then became mandatory to the extent that processors were required to collect assessments from all producers in the area subject to the board’s jurisdiction. The provision allowing any producer to obtain a refund of an assessment paid by him was retained, however, and language was added requiring the secretary of the board to make the refund not later than the 10th day of the month following the month in which the refund application and proof of payment are received.
Referenda and elections have been conducted since 1969 by producers of peanuts, grain sorghum, soybeans, turkeys, wheat, sheep and goats, pecans and swine. The sheep and goat raisers refused to adopt the program, but favorable votes resulted in the creation of commodity producer boards and the imposition of mandatory, although refundable, assessments with respect to the other commodities. The gram sorghum referendum was held on October 6, 1969, for an area embracing 29 counties in West Texas. Approximately half of the state’s production of grain sorghum is produced in these 29 counties, which comprise the western half of the Panhandle. The referendum proposition was approved by 74.1 percent of those voting at the election, and the Texas Grain Sorghum Producers Board was established. An assessment of $.05 per ton on grain sorghum was immediately levied, and processors were notified to collect and remit the same to the Board. Conlen refused to comply, and this suit was instituted to recover the amounts that should have been collected and paid. The first amended original petition contains an allegation that Conlen had failed to remit certain amounts collected by it from producers, but we find nothing in the record to support that allegation.
Conlen and Crabtree contended in the trial court that the statute and the assessments thereunder violate several provisions of the Constitutions of the United States and of the State of Texas. They now have narrowed their contentions and say that the statute contravenes the following provisions of the Texas Constitution, Vernon’s Ann.St.: (1) Article VIII, Section 1, in that the assessment is an occupation tax upon an agricultural pursuit; (2) Article VII, Section 3, in that it is an occupation tax and one-fourth of the revenue is not set aside for the benefit of the public free schools; (3) Article VIII, Section 1, in that the power to levy an occupation tax is delegated to a governmental agency not named in that section; and (4) Article VIII, Section 3, in that the assessment is a tax not levied by general law. Since the first of these attacks must be sustained, we do not consider the other three.
The parties agree that the statute as originally enacted in 1967 had no constitutional infirmities, because it did little more than establish a procedure by which producers of an agricultural commodity might voluntarily contribute to programs for their benefit. Appellants say that the 1969 amendments changed the voluntary contribution plan to one of mandatory taxation. The Board insists that the exaction is not a tax but a special assessment imposed as an incident of a reserved legislative power. It relies on cases such as City of Wichita Falls v. Williams, 119 Tex. 163, 26 S.W.2d 910, 79 A.L.R. 704; Higgins v. Bordages, 88 Tex. 458, 31 S.W. 52; and Roundtree v. Galveston, 42 Tex. 612.
Each of the cited cases involved a levy on land in the vicinity of a public im*623provement to pay the cost of the improvement and based on the special benefit the property was supposed to have derived therefrom. These are the characteristics of a special assessment, which is generally held not to be a “tax” as that term is ordinarily understood. See City of Houston v. Blackbird, Tex.Sup., 394 S.W.2d 159; 1 Cooley on Taxation, 4th ed. 1924, § 31; 70 Am.Jur.2d, Special or Local Assessments, § 1. Assessments made under Article 55c are not levied on land and do not purport to be based on benefits to property. They are not made as required to pay the cost of public improvements but are levied periodically to provide a fairly constant source of revenue that is expended by an agency of the state as it considers proper for the support of programs calculated to increase the production and use of particular agricultural commodities. These programs doubtless promote the economic welfare of many who are engaged in producing the commodities, but the assessment paid by any particular person is not necessarily related to the benefits that will be received by that person through the Board’s expenditure of the money he paid. The levy is not a special assessment.
The Board also points out that, the money: (1) is not paid into the State Treasury; (2) does not become a part of the general revenues of the State; (3) is not subject to appropriation by the Legislature; (4) can be levied only by a producer-elected board after adoption of the program by a two-thirds producer vote; and (5) is refundable at the option of the producer. It is clear that the first four of these reasons afford no basis for holding that the assessment is not a tax. In Harris County v. Shepperd, 156 Tex. 18, 291 S.W.2d 721, a local law that would have enabled Harris County to collect an additional automobile registration fee and use the funds to acquire highway right of way was held to violate the provision in Article VII, Section 3, of the Texas Constitution that taxes shall be levied and collected by general laws and for public purposes only. The money was not to be paid into the State Treasury, was not to become a part of the State’s general revenue, and was to be expended by the commissioners court. It was also provided that the law would not be operative until a majority of the resident property taxpayers of the county had voted to place it in operation. The additional registration fee was nevertheless held to be a tax.
 The refund option available to a producer who has paid the assessment presents a somewhat more difficult question, but we agree with appellants that the essential nature of the assessment is not altered thereby. A tax is a burden or charge imposed by the legislative power of the state upon persons or property to raise money for public purposes. See Clegg v. State, 42 Tex. 605; 1 Cooley on Taxation, 4th ed. 1924, § 1. When the state in the exercise of its power to raise revenue for public purposes exacts an enforced contribution of money to be expended by an agency of the state, the exaction must be regarded as a tax even though the taxpayer may obtain a refund upon request. Provision for refunding assessments to those who comply with refund requirements does not alter the fact that the payments are imposed upon and extracted from producers by governmental authority for a public purpose. The power of the state is used to deprive the producer of money, or the use of his money, for at least the time necessary to process an application for refund. It also appears that the primary purpose of the assessment is to raise revenue. We hold that assessments under Article 55c are taxes.
Once that conclusion is reached, it is clear that the assessment is an occupation tax within the meaning of Article VIII, Section 1, of the Texas Constitution. The Attorney General does not argue to the contrary. Our decision in Rouw Co. v. Texas Citrus Commission, 151 Tex. 182, 247 S.W.2d 231, involved a similar but nonrefundable tax imposed on those who packed and marketed or processed and sold citrus fruit grown in the state. The pur*624pose of the levy was to promote the citrus industry. In holding the statute unconstitutional, the Court reasoned:
Applying the above rule to the Act under consideration we find the tax levied to be an occupation tax. A reading of the Act clearly demonstrates that its primary purpose is to raise revenue, and not a regulation of the citrus fruit industry under the police power. Laudable as the purpose of the Act may be; viz. to advertise and enlarge the markets for Texas citrus fruit and its by-products, and for research beneficial to the citrus industry, the primary purpose being the raising of revenues in excess of the amount needed for regulation of the industry to carry out the above provisions, under the well established rules of law, the tax levied must of necessity be classed as an occupation tax. Being an occupation tax, it therefore comes within the plain requirements of the first sentence of Section 2, Article VIII of the Texas Constitution — that it be “equal and uniform upon the same class of subjects within the limits of the authority levying the tax”.
An occupation tax is a form of excise tax imposed upon a person for the privilege of carrying on a business, trade or occupation. State v. Galveston, H. & S. A. R. Co., 100 Tex. 153, 97 S.W. 71 (reversed on the ground that the tax was a burden on interstate commerce, 210 U.S. 217, 28 S.Ct. 638, 52 L.Ed. 1031); Pullman Palace Car Co. v. State, 64 Tex. 274. Under the terms of Article 55c the tax is imposed upon and collected from the producer who is “any person within this state engaged in the business of producing, or causing to be produced for commercial purposes, any agricultural commodity.” The tax is collected at the “commodity process point” prescribed by the Board or in the statute, and its amount is determined by the quantity of grain that is processed or handled in a commercial transaction. The subject of taxation is the businesss or occupation of producing sorghum grain for commercial purposes. The tax must be paid only by those who engage in that occupation, and that it must be paid by all so engaged except with respect to grain that is consumed in the producer’s operations without having been processed or handled in a commercial transaction. In our opinion the assessment is an occupation tax on a person engaged in an agricultural pursuit within the meaning of Article VIII, Section 1, of our Constitution. As observed by this Court in Pullman Palace Car:
That the tax contemplated by the act is an occupation tax is too clear for discussion.
* * * * * *
The subject of taxation is the thing or business done; the occupation followed for and on account of which the tax is imposed on persons and corporations that pursue it.
The judgment of the trial court is reversed, and judgment is here rendered: (1) that appellee take nothing; (2) declaring that Article 55c is unconstitutional in so far as it requires payment of assessments; (3) permanently enjoining appellee from attempting, by legal proceedings or otherwise, to compel the payment of assessments by producers or collect from processors assessments not paid by producers; and (4) adjudging all costs against appellee.
Dissenting opinion by McGEE, J., in which DENTON and SAM D. JOHNSON, JJ., join.
Dissenting opinion by DANIEL, J.

. All statutes are referred to by the article number under which they appear in Vernon’s Annotated Texas Civil Statutes.