Texas Co. v. Wilkinson (21 F. Supp. 771, 1937)

BORAH, District Judge.

The above styled suits are of similar nature and have been consolidated for the purpose of trial; accordingly they may be disposed of in one opinion.

These actions are brought by plaintiffs to enjoin the defendants from assessing or instituting legal proceedings to collect the back gasoline taxes, penalties, and attorneys’ fees which defendants have asserted are due on account of the 3 per cent, gallonage deduction heretofore made by these plaintiffs in their reports to the supervisor of public accounts, now collector of revenue, under the provisions of Act No. 6 of the Extra Session of the Legislature of Louisiana for the year 1928, as amended, and under the provisions of the constitutional amendment of 1930, Act No. 1 of the Extra Session of 1930; and to enjoin the defendants from changing the administrative interpretation heretofore given to the statute, as amended, and the constitutional amendment so as to require the payment in the future of taxes based upon the 3 per cent, of the gallonage heretofore deducted. Plaintiffs also pray for a declaratory judgment declaring as against the defendants that plaintiffs were entitled to deduct and are hereinafter entitled to deduct the 3 per cent, allowance as they have done since January 4, 1929, and November 27, 1930, the effective dates of the enactments here in controversy.

Upon the filing of these suits and on motion of counsel for the respective plaintiffs, a rule issued directing the defendants to show cause on a day certain why an interlocutory injunction should not issue in each case as prayed for. After a full hearing at which evidence was introduced in the form of affidavits, and argument had by counsel, the court issued the interlocutory injunctions for the reasons, among others, that the questions presented by the applications were grave and injury to the moving parties would be certain and irreparable if the applications were denied arid final decrees were had in their favor; and because Act No. 16 of the Second Extra Session of the Legislature of Louisiana for the year 1934, and its amendment, Act No. 23 of the Second Extra Session of the Legislature of Louisiana for the year 1935, does not provide an adequate remedy at law for the recovery of the tax, if paid under protest. The matter is now before the court on final hearing.

The material facts are not disputed. Plaintiffs, the Texas Company and the Magnolia Petroleum Company, are corporations organized and chartered under the laws of the state of Delaware and the state of Texas, respectively, and are duly authorized to do business in the state of Louisiana as a “dealer” within the meaning of Act No. 6 of the Extra Session of the Legislature of Louisiana for the year 1928, as amended, and Act No. 1 of the Extra Session of the Legislature of Louisiana for the year 1930, which latter act was adopted November 4, 1930, as a constitutional amendment, being article 6A, sections 1 through 14, of the Constitution of the state of Louisiana of 1921.

The defendants and each of them are residents of Louisiana and the Eastern District thereof, having their official residence in the Eastern District of Louisiana.

Plaintiffs have for a number of years been engaged in Louisiana in the business of importing, marketing, and selling gasoline and other motor fuel, and since the effective dates thereof have been subject to the provisions of Act No. 6 of the Extra Session of the Legislature of Louisiana for the year 1928, as amended, and of Act No. 1 of the Extra Session of the Legislature of Louisiana for the year 1930 (article 6-A of the Constitution of this state).

Plaintiffs, commencing with the month of January, 1929, up to the time of the promulgation of new forms by the collector of revenue about May, 1937, have made monthly reports of gasoline imported by it into the state of Louisiana for gasoline tax purposes under the provisions of said Act No. 6 as amended, and said Act No. 1, and said constitutional amendment; that the monthly reports were made on forms prepared and furnished to it by the supervisor of public accounts, now collector of revenue of the state of Louisiana, and plaintiffs have paid such taxes, as shown by said reports, in the amounts shown by said reports, less such deductions as may be shown on said reports; that the term gasoline as herein used includes gasoline, benzine, naphtha and other motor fuel.

Act No. 6 of the Extra Session of 1928, § 4, provided that the dealer should make monthly reports on blanks furnished by the supervisor of public accounts; that, in accordance with previous gasoline tax statutes of Louisiana, the supervisor had prepared forms for use in making returns and remitting taxes under said prior statutes, which forms had contained no provision for any 3 per cent, allowance because said allowance provision had not been referred to in said prior statutes. Act No. 6 of the Extra Session of 1928 authorized a 3 per cent, allowance as defined in said statute, and subsequent to its enactment there was a discussion between E. A. Conway, then supervisor of public accounts, and attorneys for certain major oil companies, notably Mr. Henry C. Walker, Jr., representing the Louisiana Oil Refinery Company. That in the Walker correspondence which has been admitted in evidence, Mr. Conway announced that, for the purpose of the 3 per cent, allowance by deduction from gallonage received, his department intended to treat sales as the equivalent of receipts and that it was, therefore, desired by his department that the deduction of 3 per cent, be made by the dealers from gallonage represented by monthly sales, use, and consumption. That from the time of the exchange of this correspondence down to the time of the letter of demand from Hugh M. Wilkinson, special counsel, dated March 26, 1937, it was the unbroken practice of the dealers in the state of Louisiana, with the exception of the Shell Petroleum Corporation, to report and remit in the manner indicated by Mr. Conway, including the taking of the 3 per cent, allowance on the basis of deduction from actual sales, use, and consumption; that it was the consistent practice of Mr. Conway’s department, and later Miss Grosjean’s department, to accept reports and remittances on that basis, to furnish blanks on which a 3 per cent, deduction on such basis was indicated in the printed form, to receipt for tax remittances on that basis, to recheck and approve the reports on that basis, and in all matters to act consistently with the original opinion expressed by Mr. Conway in the correspondence to Mr. Walker.

From the 4th day of January, 1929, until March 26, 1937, the supervisor of public accounts, now collector of revenue, accepted remittances by plaintiffs of said gasoline tax, calculated after a deduction of 3 per cent, of the total gallonage received. That said supervisor of public accounts, later the collector of revenue, during said period, never required any accounting by said plaintiffs of any “losses in handling such motor vehicle fuel” (gasoline, etc.).

It was the practice of the supervisor of public ■ accounts, later collector of revenue, periodically to send auditors to inspect the duplicate originals of the monthly returns kept by plaintiffs, together with the work sheets attached 'to such duplicate original returns, and any books or records considered necessary by the auditors to check the returns, and the auditors, upon completion of their inspection, would mark said duplicate original returns “Approved” or “OK” and sign their names on the duplicate originals. The auditors would then send a report to the supervisor, detailing the results of their examination of the records of plaintiffs, showing the amount of the tax as calculated by them from the plaintiff’s records; that another employee in the office of said supervisor of public accounts would then compare said reports of the auditors with the original returns of plaintiffs, and, if the figures coincided, would write to the supervisor of public accounts stating that such returns were correct.

The authority for imposing gasoline taxes in Louisiana is found in section 22 of article 6 of the Constitution of 1921 which authorized the collection of a tax of two cents per gallon on gasoline sold in the state. At the regular session of the-Legislature for the year 1928, there was adopted for submission to the people at the general election to be held in November of that year, two amendments to this article of the Constitution. Act No. 204 of 1928 proposed an amendment to said article by adding thereto section 25, which reads as follows: “The provisions herein-above, relating to the tax on gasoline, shall apply to all gasoline sold, used or consumed in the State of Louisiana; said tax to be collected as is now, or may hereafter be, prescribed by law.”

Act No. 219 of 1928 proposed that section 22 of said article be amended to read as follows: “On gasoline, benzine, naphtha and other motor fuels, as defined by law, when sold, used or consumed in the State of Louisiana, there shall be levied a tax not to exceed four cents (4 Under section 2 of the statutes it is provided that the tax “shall be collectible from all persons, firms, corporations or associations of persons, engaged as dealers.” The tax is payable by the dealer, who alone makes the reports, and since he is the person who originally disposes of the gasoline he pays this tax upon the gasoline sold, used, or consumed by him. Even if it be true that he passes on the tax to the consumer, and he does not, because the tax is laid on him alone, he certainly cannot pass on to the consumer the tax on gasoline which he uses or consumes. Furthermore, the tax receipt which constitutes the only legal evidence showing payment of the tax is issued by the supervisor of public accounts to the dealer and not to the ultimate consumer, It is the dealer who is obliged to furnish the bond guaranteeing the payment of the tax before engaging in business as a dealer, and his failure to pay said tax and furnish bond causes the tax to become immediately delinquent. Likewise, all supervision is over the dealer and all penalties are imposed upon him. Nor is there anything in the language of these statutes that supports the contention that the dealer is to prepay the tax and is then to collect the tax from the public who is the real 'taxpayer. The contention of counsel that plaintiffs have made it a consumers’ tax by billing the tax as a separate item and advertising the tax at filling stations raises a question that cannot possibly have any bearing on the interpretation of the statute. Central Transfer Co. v. Commercial Oil Co. et al., 8 Cir., 45 F.2d 400; State v. Wilson & Co., Inc., of Louisiana, 179 La. 648, 154 So. 636. The contention that plaintiffs have no interest to question the right of the state to collect this tax because of the fact that they are the tax collectors and not taxpayers is likewise without merit.

It is further urged that the primary objective of the statute was to levy the tax on all gasoline sold, used, or consumed, and that the allowance clause being an exception to that general objective should be strictly construed. Furthermore, that the plain meaning of the text itself showed that the allowance was for prospective handling losses between the time of the dealer’s receiving the gasoline and his selling date and therefore could not be computed by deduction from sales, use, or consumption after the gasoline had been sold, used, or consumed# and when the dealer could no longer sustain any handling losses upon same. These questions «have all been carefully considered in reaching the conclusions heretofore stated, and to avoid repetition only brief comment will be made to the claim that the allowance clause covers only prospective handling losses. In this connection it must be borne in mind that the original act did not permit or require the payment of the tax in advance, nor did it contain any provision about furnishing bond. Payment was permitted only after gasoline was sold, used, or consumed, consequently the importer or manufacturer could not pay in advance and use the 3 per cent, deduction to cover prospective losses. The supervisor of public accounts was under the duty of making the law work and he was charged with the duty of interpreting the statute so as to make the 3 per cent, allowance effective, and he undoubtedly realized that this could only be done by deducting the allowance from sales at the time the tax was paid; a conclusion which seems inescapable since the quantities shown on the dealer’s monthly report are the only quantities upon which it is possible to compute the amount of the tax to be paid and the amount of the deduction allowed by section 1 of the act.

While it is believed that the administrative construction placed upon this statute by those whose duty it was to collect the tax and to enforce the provisions thereof is the only construction which is consistent with all the provisions of the act and the only one which would give any meaning to the 3 per cent, allowance provision, the fact nevertheless remains that the statute is not clear or free from all ambiguity but in fact is most confusing. There is nothing in the legislative history of the original act that throws any light on its meaning other than the fact that the allowance provision was inserted in the act as an amendment by a committee of the Senate after the act had passed the House. This circumstance undoubtedly accounts for the fact that the allowance provision does not conform precisely with the wording of the remainder of the statute. However, be that as it may, the statute is inartistically drafted and the fact that this allowance provision of the statute is of doubtful meaning demands, that great weight should be given to the construction placed upon it by the department charged with its execution. As stated in United States v. Jackson, 280 U.S. 183, 50 S.Ct. 143, 146, 74 L.Ed. 361: “It is a familiar rule of statutory construction that great weight is properly to be given to the construction consistently given to a statute by the Executive Department charged with its administration. United States v. Cerecedo Hermanos v. Compania, 209 U.S. 337, 28 S.Ct. 532, 52 L.Ed. 821; Robertson v. Downing, 127 U.S. 607, 8 S.Ct. 1328, 32 L.Ed. 269; United States v. Healey, 160 U.S. 136, 16 S.Ct. 247, 40 L.Ed. 369; and such construction is not to be overturned unless clearly wrong, or unless a different construction is plainly required. United States v. Johnston, 124 U.S. 236, 253, 8 S.Ct. 446, 31 L.Ed. 389; Hawley v. Diller, 178 U.S. 476, 488, 20 S.Ct. 986, 44 L.Ed. 1157.”

Again in McCaughn v. Hershey Chocolate Co., 283 U.S. 488, 51 S.Ct. 510, 512, 75 L.Ed. 1183, the court said, “The re-enactment of the statute by Congress, as well as the failure to amend it in the face of the consistent administrative construction, is at least persuasive of a legislative recognition and approval of the statute as construed. See National Lead Co. v. United States, 252 U.S. 140, 146, 40 S.Ct. 237, 64 L.Ed. 496. We see no reason for rejecting that construction.”

In State v. Central Bank & Trust Co., 143 La. 1053, 79 So. 857, 859, the court quoted approvingly Sutherland on Statutory Construction, paragraph 309, saying: “The practical" construction given to a doubtful statute by the public officers of the state, and acted upon by the people thereof, is to be considered; it is perhaps decisive in case of doub't. This is similar in effect to a course of judicial decisions. The Legislature is presumed to be cognizant of. such construction, and after long-continuance, without any legislation evincing its dissent, courts will consider themselves warranted in adopting that construction.”

Therefore, even if it be that the supervisor of public accounts in this case was in error as respects his original ruling, such error would not necessarily justify a change in the ruling after it had been in effect for more than 8 years. State v. Comptoir National D’Escompte de Paris, 51 La.Ann. 1272, 1281, 26 So. 91. Indeed the doctrine of contemporaneous construction is so well recognized that it will serve no useful purpose to multiply .the authorities. Applying the doctrine of these cases to the solution of the question under consideration, I have reached the conclusion that the administrative interpretation and cnstruction given these enactments by the officers of the state were entirely reasonable and consistent with all the provisions of the statutes, and that this long-continued administrative interpretation should not be disturbed where as here the allowance provision of the statutes is ambiguous and of doubtful meaning.

It follows that the preliminary injunctions herein granted should be perpetuated and that plaintiffs should have judgment in accordance with the views .herein expressed declaring as against the defendants that the plaintiffs were entitled to deduct, and are hereinafter entitled to deduct, the 3 per cent, allowance, as they have done since the effective dates of the enactments here in controversy. Decrees to this effect may accordingly be submitted.

If it is not believed that this opinion is a sufficient compliance with rule 70% of the Equity Rules, 28 U.S.C.A. following section 723, findings of fact and conclusions of law may be submitted; otherwise, this opinion will stand as the findings of fact and conclusions of law in this case, and be deemed to constitute the for-' mal decision thereof.