Miss. State Tax Comm'n v. Murphy Oil USA, Inc.
| Docket Number: | 2003-CA-00325-SCT Linked Case(s): 2003-CA-00325-SCT ; 2003-CA-00325-SCT ; 2003-CA-00325-SCT |
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| Supreme Court: | Opinion Link Opinion Date: 10-13-2005 Holding: Reversed and Rendered |
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| Additional Case Information: |
Topic: Tax assessment - Destination sales theory - Section 27-7-23(c)(3) - Franchise tax Judge(s) Concurring: Waller and Cobb, P.JJ., Easley, Carlson, Dickinson and Randolph, JJ. Non Participating Judge(s): Diaz, J. Dissenting Author : Graves, J. Procedural History: Admin or Agency Judgment Nature of the Case: CIVIL - STATE BOARDS AND AGENCIES |
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| Trial Court: |
Date of Trial Judgment: 01-21-2003 Appealed from: SIMPSON COUNTY CHANCERY COURT Judge: J. Larry Buffington Case Number: 2001-0086 |
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| Note: | The motion for rehearing filed by Murphy Oil USA, Inc., is granted. The prior opinions are withdrawn, and this opinion is substituted therefor. | |
| Party Name: | Attorney Name: | |||
| Appellant: | Mississippi State Tax Commission |
SAMUEL T. POLK, GARY WOOD STRINGER |
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| Appellee: | Murphy Oil USA, Inc. | JAMIE G. HOUSTON, W. TERRELL STUBBS |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Tax assessment - Destination sales theory - Section 27-7-23(c)(3) - Franchise tax |
| Summary of the Facts: | The motion for rehearing is granted, and this opinion is substituted for the original opinion. In 1999, the Mississippi State Tax Commission examined the Mississippi Combined Income and Franchise tax returns of Murphy Oil U.S.A., Inc. for the tax years of 1995, 1996, and 1997. As a result, the Commission assessed additional franchise taxes and interest against Murphy in the amount of $87,952. After two internal agency appeals, Murphy sought judicial review. The chancellor ordered that the additional franchise tax assessment made by the Commission not be allowed. The Commission appeals. |
| Summary of Opinion Analysis: | Murphy argues that the chancellor’s ruling should be affirmed because section 27-7-23(c)(3) provides for the application of the Destination Sales Theory to determine those “sales” assignable to Mississippi for purposes of any formula in which a sales factor is included regardless of ownership, title, control or risk of loss. In Mississippi State Tax Comm’n v. Chevron U.S.A., Inc., 650 So. 2d 1353 (Miss. 1995), the destination theory was specifically rejected by the Court as a way to account for Mississippi receipts for franchise tax purposes. The same version of section 27-7-23 was in effect when Chevron was decided. Murphy had no knowledge of the whereabouts of the product or its ultimate destination and was not taxed by the state of the purchaser. Therefore, Mississippi can tax these sales unless such a tax would violate the commerce clause. Murphy argues that the tax does not have a substantial nexus with Mississippi. In addition to being merely stored in Mississippi for periods not exceeding five days, the product was metered when it was stored in Collins, Mississippi, which was the basis for Murphy to bill its purchasers for the sale. In addition to being metered and billed in Mississippi, the transfer of title, ownership and control of the product also occurred in Collins, Mississippi. Once metered and billed in Mississippi, the purchasers took absolute control of the product, and Murphy had no knowledge of the whereabouts of the product or its ultimate destination. Therefore, Murphy did not merely store the fuel in Mississippi, and there is a substantial nexus to warrant franchise taxation. The party opposing the tax must show by clear and cogent evidence that the tax is out of proportion to the activity which takes place in Mississippi. It is proper to include these sales in the franchise tax apportionment formula because the franchise tax statute does allow Mississippi to tax these activities. If the tax causes so called ‘double taxation’ so that an interstate taxpayer is subjected to two taxes on the same income that an intrastate taxpayer would pay one tax on, then the tax is said to be discriminatory. Murphy is not subject to double taxation as a result of the franchise tax in this case, nor does the franchise tax imposed discriminate against interstate commerce in favor of intrastate commerce. Therefore, the franchise tax is not discriminatory. All of the activities mentioned above occurred in Mississippi and relate to the particular sales in question. Moreover, Murphy receives police and fire protection, use of transit in Mississippi and other advantages of civilized society. Consequently, there is a fair relationship between the services provided by Mississippi in allowing the sales to occur and the value of those sales. The franchise tax imposed by the Commission does not violate of the commerce or due process clauses of the United States Constitution. |
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