Court Opinion

ID: 9419789
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:51:28.897677+00
Date Added: 2024-06-11T17:22:20.627585
License: Public Domain

Opinion of Me. Justice Rutledge,
dissenting, announced by the Chief Justice.
In No. 328 the Court sustains the application of the Arkansas severance tax to the appellants.1 In my judgment the cause should be remanded to the state court for it to determine the applicability of the lien and collection provisions to the United States, or their severability, and in the light of that determination to ascertain the constitutional validity of the tax as applied to appellants. Those issues are inescapable on the record in this case. For until they are determined any decision here can affect only a tax of uncertain incidence, unless the Court in sustaining it means to rule, as I think the Arkansas court ruled, that the tax is valid whether or not the statute’s lien and collection provisions2 apply to the United States as owner of the land and the severed timber.
*490Neither course is properly open to us. Since the Arkansas court,,as this Court’s opinion does not dispute, has sustained the tax without deciding whether the lien and collection provisions are severable and inapplicable to the United States, we are completely at loss to know whether the tax rests ultimately upon the Government, as it does under Arkansas law on all other owners not expressly exempted. Consequently we have no determinable issue, but only a speculative inquiry of a sort beyond the tradition and, in my opinion, the jurisdiction of this Court to decide. On the other hand, if the effect of the decision here, as in the Arkansas court, is to sustain the tax regardless of whether the lien and collection provisions apply in whole or in part to the United States, the result is substantially to sustain a tax laid by the state directly on the Government. This result is as unacceptable as to render an advisory opinion upon the validity of a tax of uncertain and speculative application.
From McCulloch v. Maryland, 4 Wheat. 316, to now the rule has remained that the states are without power, absent the consent of Congress, to tax the United States, whether with reference to its property or its functions. *491United States v. Allegheny County, 322 U. S. 174, 177. That rule is of the essence of federal supremacy. It is not to be chipped away by ambiguous decisions of state courts or easy assumptions relating to their effects which ignore the direct impact of state taxes where they have no right to strike. :
This is true regardless of the vagaries of decision, at different periods, in allowing expansion of the Government’s immunity to include others. Recent recessions from former broad-extensions of this kind have settled that ultimate economic incidence upon the Government of a staté tax laid upon others is not alone enough to invalidate the tax. James v. Dravo Contracting Co., 302 U. S. 134; Alabama v. King & Boozer, 314 U. S. 1; see Penn Dairies v. Milk Control Comm’n, 318 U. S. 261, 269.3 But this does not mean either that such incidence of the tax is ir-. relevant to its validity or that all state taxes purporting to be laid upon others but in fact reaching the Government are valid.
It is still true that “the taxpayer is the person ultimately liable for the tax itself.” Colorado Bank v. Bedford, 310 U. S. 41, 52; Federal Land Bank v. Bismarck, 314 U. S. 95. If the person who must pay the tax in the first place is required by the taxing statute to collect the tax or an equivalent amount from the United States, the tax is upon the United States. “State law could not obligate the Central Government to reimburse for a valid tax, much less for an invalid one.” United States v. Allegheny County, 322 U. S. 174, 189. Although the Court has gone far in permitting the states to force one private person to act as tax collector for another, cf. Monamotor Oil Co. v. Johnson, 292 U. S. 86 ; Felt & Tarrant Mfg. Co. v. Galla*492gher, 306 U. S. 62; General Trading Co. v. Iowa Tax Comm’n, 322 U. S. 335, and dissenting opinion at 339, that device cannot be utilized by the states to lay taxes on the United States. Nor has it been held heretofore, if it is now, that a tax purporting to be laid upon a private individual or concern is valid regardless of whether the provisions of the state taxing statute for passing on the tax- to another are applicable to the United States or are valid if so applied.
I am unable to comprehend the effect of the Court’s decision. If it is ruling sub silentio or ex hypothesi that the lien, and collection provisions of the Arkansas statute, for any application to the Government, are inapplicable or severable, we have no right to make such a decision. That is the business of the Arkansas courts. If the ruling is that the tax is valid even though those provisions are applicable to the United States, then for the first time the Court is overruling the basic principle of McCulloch v. Maryland. If the decision is, finally, that the tax is valid whether or not the lien and collection provisions are applicable or severable, then it embodies both faults.
I do not think the Court means to overrule McCulloch v. Maryland. Nor does it purport to interpret or determine the Arkansas law concerning either applicability or severability of the statute’s provisions. But unless it is doing this, without so stating, I see no escape from the other horn of the dilemma. Either the tax as applied is valid or it is invalid. Whether it is valid or not depends on whether the lien and collection provisions apply to the United States, for they place the tax directly upon the owner. That issue is inescapable in this case, whether in the Arkansas court or here.
I do not think the Arkansas court decided either that the lien and collection provisions are inapplicable to the United States or that they are severable from the re*493mainder of the statute, notwithstanding it had those provisions before it, cited them though without ruling upon them, and proceeded to sustain the application of the tax to appellants. I think it clear that the court avoided making such a ruling. In my opinion the Arkansas decision in effect, though not in words, was that the tax is valid regardless of whether the enforcement provisions apply to the United States; which in effect was to rule that the tax had been constitutionally applied even though the collection provisions are applicable to the United States; to the extent at least of the withholding provisions.
My reasons for this view are several. In the first place, the court’s opinion; though noting the collection and lien provisions and the contract’s term that title to the severed timber should remain in the Government “until it has been paid for, and scaled, measured or counted,” does this in the introductory statement of the case and then proceeds through a lengthy discussion without again referring to those provisions.
Moreover they provide plainly that where the severer is different from the owner, the former must pay the tax but he is required to pass it on to the owner.4 A further provision requires him to withhold the amount of the tax from any money or severed property in kind due the owner under their contract.5
6Another section gives the state a *494lien on the severed resources for the tax and penalties.8 The clear effect of the provisions requiring “the reporting taxpayer” to “collect or withhold” the amount of the tax from the owner is to give him a defense to the owner’s action to recover the full contract price for the severed resources and an equally clear right of action against the owner for the amount of the tax.
Thus the scheme of the tax is to place both its ultimate legal and its ultimate economic incidence on the owner. The tax in terms is “due by the respective owners of such natural resources.” *****67 It is “a privilege tax or license tax; and is levied on the business of severing,” as the Arkansas court declared in this case. 208 Ark. 459, 468, 187 S. W. 2d 7, 12. But. it is ultimately, as that court has also declared, though not expressly in this case, a privilege or license tax levied upon the owner’s business of severing, for it applies to him whenever he severs or permits severance for sale; and “sale” includes turning over the timber *495to one who clears the land as payment for the clearing, although his purpose in doing this is only to make the soil available for tilling.8
Moreover, as the Arkansas court did hold specifically in this case, the act contains only two exemptions, neither of which applies to the United States.9 And on this ground, together with the maxim expressio unius, it ruled the act applicable to the severance of timber “in all instances except the two exemptions mentioned.”10
That ruling, it seems to me, is especially significant when it is considered not only in the light of the court’s failure to make further reference to or ruling upon the collection provisions, but also in view of the Arkansas court’s previous decisions. Thus, in Miller Lumber Co. v. Floyd, 169 Ark. 473, 480, 275 S. W. 741, the court held: “Where a landowner makes a contract with another person to cut and remove the timber from his land for sale or commercial purposes, the owner must pay the severance tax; for such contractor and his servants who actually sever the timber act for the owner in the premises, and their act of severing the timber is the act of the owner.” *11 (Emphasis added.)
*496No reference was made in this case to the Miller case. •In the absence of one we cannot assume that the court intended to overrule that decision or to destroy its rationalization or universal applicability, except for the spécific exemptions. Not only the opinion in this case, as much by its omissions as by what it expressly rules, but also the Arkansas court's prior decisions, give every ground for believing that it did not intend either to apply the tax differently in this case than in any other or to overrule its *497prior determinations of the ultimate nature, character and incidence of the tax.12
The majority seem to imply however that this may be exactly what was done; that perhaps the Arkansas court held that since the tax would be unconstitutional if, as the statute contemplates, it were directly placed upon the Government as owner, it would treat the tax as falling not on the Government but on the severer alone. As has been stated, nothing in that court’s opinion suggests such a ruling. And if there were either a ruling or a sufficient suggestion of this sort, it would raise other serious questions, not considered by that court or here, concerning the validity of the tax. The effect1 of such a holding would seem to be to single out contractors with the Government for the imposition of a tax not placed on other severers. All other contractors, by the terms of the statute and the Arkansas decisions, would be required to pass the tax along to owners. Only contractors with the Government would not be allowed or required to do this. Thus to treat the tax as applicable only to the severer in this case, and the collection provisions affecting the owner as severable and inapplicable, would raise serious questions of discrimination, which neither the Arkansas court nor this Court has *498considered and which appellants are entitled to have determined.
It is true that they have not raised here any question of discriminatory enforcement. But this is because they had no reason to believe that the Arkansas court had applied, or would apply, the statute differently to them than to others or to anticipate the character of the ruling now made. It is doubtful, to say the least, that the Arkansas legislature could place a severance tax exclusively upon persons who sever resources from governmentally owned land. The same doubt would apply to the state court’s effort to make the statute so effective, were it to undertake doing this. In my judgment it has not done so. Whether or not such an effort ultimately would be successful, appellants are entitled to be heard upon the question before that result is achieved. They should not be deprived of this opportunity through this Court’s upholding of an ambiguously applicable statute or in advance of a decision by the only court which can remove the ambiguity. Because the Arkansas court has not passed upon applicability or severability of the collection provisions as they affect the owner, and because it has not determined the validity of the tax as applied in the light of such a determination, I think the cause should be remanded to it, so that the former questions may be authoritatively determined before we undertake to decide, upon the wholly speculative basis now presented, whether the tax as applied is valid.

 On the jurisdictional discussion of the Court the appellants are, of course, petitioners on certiorari.

 Pope’s Digest Ark. (1937) §§ 13371-13395. The statute was first enacted in 1923. Acts of Arkansas, 1923, Act 118. It was materially *490amended in 1929, but its essential scheme remained the same. Acts of Arkansas, 1929, Act 283. See notes 4-6, 9-12, and text, for the substance and effects of the provisions.
Although, as I read its opinion, the Arkansas court carefully refrained from ruling upon their severability and therefore also their applicability to the Government (see text infra), the hen and collection provisions were before it, were cited in the opinion, and were necessarily involved in the issues presented. The court appears to have ruled that the tax is valid as applied to the appellants regardless of whether these provisions are severable or are applicable to the United States. That it did so furnishes no ground for believing that the issues relating to them were not presented or were waived. The petition for rehearing, as well as the opinion itself, demonstrates the contrary. The first ground set forth was: “The court erred in holding that the tax was not a direct tax on the United States.”

 See Powell, The Waning of Intergovernmental Tax Immunities (1945) 58 Harv. L. Rev. 633; Powell, The Remnant of Intergovernmental Tax Immunities (1945) 58 Harv. L, Rev. 757.

Pope’s Digest Ark. §13382 provides: “The reporting taxpayer shall collect or withhold out of the proceeds of the sale of the products severed the proportionate parts of the total tax due by the respective owners of such natural resources at the time of severance.” (Emphasis added.)

 The provision reads: “Every producer actually operating any oil or gas well, quarry or other property from which natural resources are severed, under contract or agreement requiring payment direct to the owner of any royalty, excess royalty or working interest, either in money or in kind, is hereby authorized, empowered and required to deduct from any such royalty or other interest the amount of the *494severance tax herein levied before making such payment.” Pope’s Digest Ark. § 13382. (Emphasis added.).
“Producer” is defined as every person, firm, corporation or association of persons “engaged in the business of mining, cutting or otherwise severing from the soil or water for commercial purposes natural resources, including minerals and ores, pearls, diamonds, and other precious stones, bauxite, fuller’s earth, phosphates, shells, chalk, cement, clay, sand, gravel, asphalt, ochre, oil, gas, salt, sulphur, lignite, coal, marble, stones and stone products, timber, turpentine and all other forest products and all other natural products of the soil or water of Arkansas.” Pope’s Digest Ark. § 13371.

 Pope’s Digest Ark. § 13376: “The State of Arkansas shall have a lien upon any and all natural resources severed from the soil or water for the tax and penalties herein imposed and, in addition thereto, said lien shall attach to the well, machinery, tools and implements used in severing of such resources."
As the section was enacted originally in 1923 the provision for attachment of the lien to machinery, etc., used in severing was not included. This was added by amendment in 1929. Cf. note 2.

 See note 4.

 See note 11.

 One was for the individual owner who occasionally severs in order to build or repair improvements on the premises or for his own use and another for the “producer of switch ties” who hews them out entirely by hand.' 208 Ark. 459, 463, 187 S. W. 2d 7, 10.

 The decision held the tax invalid as applied to the severance from lands held by the United States as original owner, though not as to those purchased with the state’s consent.

 The effect of th§ quoted statement is emphasized by its context, ini part as follows: “It is apparent then that the owner of lands, who cuts down trees for the purpose of building fences or repairing and constructing houses and other improvements on the land from the timber thus severed from the soil is exempted from paying the tax. It is equally evident that when the timber severed from the soil is *496sold, it falls within the terms of the act, and the tax must be paid by someone. To illustrate: if the owner of timber lands desired to sever it tor the purpose of clearing the land and putting it in cultivation and hired other persons to sever the timber .for him, he would be required to pay the severance tax. If the owner should lease his land to another person for a designated number of years in order to have his lessee clear the land and put it in cultivation, and if the consideration for the lease in whole or in part was that the lessee should have the timber so removed from the land, the severance tax would have to be paid by such lessee. It will be noted that the language of the act is specific on this subject and provides that the severer or producer as he is called shall pay the tax. The act is very broad' and comprehensive, and is levied upon all persons engaged in severing the timber from the soil for sale or commercial purposes, regardless of the purpose for which it is done. The only exception is that the tax shall not be paid where the timber severed is actually used in erecting or repairing structures and other improvements on the land. The application of the timber in part payment for clearing the land is a severing of it for commercial purposes, although the primary purpose of severing it is to enable the land to be put in cultivation. Where a landowner makes a contract with another person to cut and remove the timber from his land for sale or commercial purposes, the owner must pay the severance tax; for such contractor and his servants who actually sever the timber act for the owner in the premises, and their act of severing the timber is the act of the owner.”
In a previous appeal in the same case, 160 Ark. 17, 254 S. W. 450, the court had sustained the act as constitutional on the theory that it was a privilege tax and not a property tax.

 This view is sustained also by the court’s expressed view that “Imposition of the tax here does not in any sense' interfere with the Government’s business.” 208 Ark. 459, 468, 187 S. W. 2d 7,12. The statement could mean that the tax would not be applied to the Government as to other owners, in which event a severance of the collection provisions would be implied. That it does not have this meaning is evidenced, I think, by the court’s reliance on James v. Dravo Contracting Co., supra, where quite different statutory provisions were in question. The court’s misapplication of the Dravo case was, I think, but a reflection of its implicit idea that the tax would be valid since it was collected immediately from the appellants, even though they might pass on its economic burden to the Government, without regard to how that might be done.