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liabilitytrialcorporation
plaintiffliabilityappealtrialcorporation

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Texas Co. v. Cooper, 236 La. 380, 107 So.2d 676

Facts

The Texas Company, a foreign corporation engaged in the oil business, produced and purchased significant quantities of crude oil in Louisiana. For the tax years in question, the Collector determined that the use of the apportionment method for calculating the company's income was manifestly unfair and required the company to use a separate accounting method instead. The company protested this determination and paid the assessed taxes under protest, leading to the current legal action to recover those payments.

The Texas Company, plaintiff herein, is a foreign corporation. For many years it has been engaged on a large scale in all phases of the oil business. Its petition alleges that the plaintiff operates eleven oil refineries and three asphalt plants in the United States elsewhere than in Louisiana. These refineries and plants have a daily crude oil capacity of 510,000 barrels. In the year 1950, being the first tax year in question herein, the plaintiff produced by exploration and field development crude oil and condensate from fifteen states including Louisiana and three foreign countries a net production of approximately 103,000,000 barrels and purchased in the United States and foreign countries crude oil and condensate approximately 168,000,000 barrels.

Issue

Whether the Collector had the statutory power to require the Texas Company to report its income using the separate accounting method instead of the statutory apportionment method.

The central questions of this appeal concern whether the Collector (as held by the trial court) may—for Louisiana state income tax purposes—require the taxpayer to report his income by the separate accounting method, rather than (as the taxpayer argues) the taxpayer having the right to use a statutory apportionment method.

Rule

The Collector has the authority to require a taxpayer to use the separate accounting method if the apportionment method produces a manifestly unfair result, as outlined in LSA-R.S. 47:244.

The provisions of (LSA-) R.S. 47:241, 242, 243, 244, 245 and 246 define the manner in which the net income earned by a foreign corporation from sources within the state is to be determined and prescribe two methods of determining the amount of income tax to be paid in this State: (1) The Separate accounting method, by adding all the rents, royalties, profits and all other income derived from operations and business done in Louisiana, from the gross of which there shall be taken all expenses and other deductions attributable to the business transactions in this state, and (2) the Apportionment method by the application of a formula consisting of the arithmetical average of three ratios.

Analysis

The court analyzed the statutory provisions and determined that the Collector's requirement for the Texas Company to use the separate accounting method was justified. The court found that the apportionment method did not accurately reflect the company's income derived from Louisiana sources and that the separate accounting method would provide a fairer assessment of the taxable income attributable to the company's operations in the state.

The court analyzed the statutory provisions and determined that the Collector's requirement for the Texas Company to use the separate accounting method was justified. The court found that the apportionment method did not accurately reflect the company's income derived from Louisiana sources and that the separate accounting method would provide a fairer assessment of the taxable income attributable to the company's operations in the state.

Conclusion

The court affirmed the trial court's judgment, concluding that the Collector acted within his statutory authority and that the separate accounting method was appropriate for determining the Texas Company's income tax liability.

The court affirmed the trial court's judgment, concluding that the Collector acted within his statutory authority and that the separate accounting method was appropriate for determining the Texas Company's income tax liability.

Who won?

Collector of Revenue prevailed because the court upheld the Collector's authority to require the separate accounting method, finding that the apportionment method was manifestly unfair.

Collector of Revenue prevailed because the court upheld the Collector's authority to require the separate accounting method, finding that the apportionment method was manifestly unfair.

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