tion tax payable to the state auditor shall be, tom where ad valorem taxes are provided for, equal to 2 per centum of the gross value of and as the Oklahoma laws require.' the production of petroleum or other mineral oil or natural gas. The present act also contains the following provisos at the end of amended section 7464:

[3] It is urged with much ability that the provision of the act which provides that, "In lieu of any other taxes that might be levied and collected upon an ad valorem basis upon the equipment and machinery in and around any well producing natural gas or petroleum or other mineral oil, and used in such actual operation of such producing well," violates both sections 46, 46u, and 50, art. 5, of the state Constitution, prohibiting the Legislature from passing any law exempting any property within the state from taxation, and that whether the tax be upon the property as such or upon the occupation The first contention is easily met; for by the terms of the act the property named is not exempt unless a gross production tax is collected as therein provided. If a property tax is collected under the general taxing laws of the state, no gross production the case of oil on hand for more than 30 tax is levied or collected, unless, possibly, in to such tax the act does not attempt to exdays from tax-rendering period. Hence as empt equipment and machinery. Such is the clear and unmistakable intent of the act, giving to the language used its plain and commonly accepted meaning.

or business.

lature, notwithstanding its inapplicability or privilege tax upon a federal instrumentalto one of the principal railroads within the ity acting under congressional authority. state, but over which the Legislature was without power to levy such tax. Here the statute, operating alike upon all those engaged in the industries named and over which the state could rightfully exercise the authority attempted, and not being discriminatory, within a constitutional meaning, is not repugnant to section 5, art. 10, of the Constitution, requiring that "taxes shall be uniform upon the same class of subjects." The statutes provide that all real property in the state, other than such as is specific ally exempted, shall be subject to taxation. Rev. Laws 1910, § 7302; section 1, subd. A, c. 107, Sess. Laws 1915. Yet, notwithstanding the statute, a large amount of land is not taxed and cannot be, by reason of treaty stipulations or agreements containing covenants against taxation made and entered into between the government of the United States and the Indian tribes in the state, and which provisions inure to the benefit of the enrolled tribal members to whom the lands of the tribe were allotted. Choate v. Trapp, 224 U. S. 665, 32 Sup. Ct. 565, 56 L. Ed. 941; Gleason v. Wood, 224 U. S. 679, 32 Sup. Ct. 571, 56 L. Ed. 947; English v. Richardson, 224 U. S. 680, 32 Sup. Ct. 571, 56 L. Ed. 949. It could not successfully be contended, nor has it to our knowledge ever been claimed, that because of the nontax-chinery, but provides that the payment of ability of these lands for the time other lands of like character, but unrestricted in the matter of exemption from taxation, were not, therefore, subject to taxation; and this regardless of both our Constitutional inhibitions against exempting property from taxation, and requiring that all taxes shall be uniform upon the same class of subjects.

As to those liable to and who pay a gross production tax, it will be noted that the act does not in terms exempt equipment and ma

the gross production tax shall be in lieu of any other tax that might be levied and collected on said property upon an ad valorem basis. This is not an exemption from taxation within the meaning of the constitutional inhibitions, but a substitution of one form of taxation for another upon the terms and conditions named. The equipment and machinery referred to is confined to that used in the actual operation of producing wells, hence does not include equipment and machinery on hand, and not so used. By the act a tax is levied based upon the value of the gross production. This can only arise through the discovery and production of oil or gas. The equipment and machinery owned by the producer, and which is an indispensable agency in the discovery and production of the commodity, forms a part of the property out of which the production arises. Without it production is impossible. The same is not taxed directly, neither are the lands or leases, where the production is through a lessee.

In the leasing of the lands of the Osage Nation for oil and gas, as well as in the making of such leases on the restricted lands of certain of the allottees of the Five Civilized Tribes, the Department of the Interior, acting pursuant to lawful warrant, has in be half of these Indians, whom Congress has regarded as dependent, and in need of the government's aid and protection, assumed full and complete jurisdiction and control during the period of dependency. This form of general guardianship is exercised because of the duty owing these dependent people, that the vast oil and gas deposits underneath their lands may be developed and marketed, and those lawfully entitled thereto given the A very instructive case, and one that gives benefit thereof. As was said in the Harrison strong support to our views, is that of McCase, the instrumentalities made use of by the Henry v. Alford, 168 U. S. 651, 18 Sup. Ct. general government are the lessees of such 242, 42 L. Ed. 614. There an act of the Dalands or their duly authorized assignees. kota Legislature exempted from taxation, More need not be said in this connection, for other than as provided by the act, lands the question is foreclosed by the opinion in granted to aid in the construction of the the Harrison Case. The limitation upon the Northern Pacific Railroad, which were outstate's power in this regard is expressly rec- side of the right of way and not used in its ognized by the act itself, and by counsel, who business as a common carrier, and provided say that the state cannot levy an occupation for the taxation of railroads by percentage

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In

of gross earnings in lieu of all other taxes. It has been said that classification for taxIt was insisted that the lands were simply ation is not necessarily based upon any es"property owned by railroad," and not "rail-sential difference in the nature of the various road property," and that, although railroad subjects. It may be based as well upon the property might be taxed in a given special want of adaptability to the same methods method and at a special rate, yet by the term of taxation, or upon the impracticability to "railroad property" was simply meant prop- the same methods of taxation, or upon the erty necessary for the use in the usual daily impracticability of applying to the various conduct of the business of the company as a subjects the same methods so as to produce common carrier by rail, and that any lands just and uniform results, or it may be based outside of that used, although owned by a upon just and well-grounded considerations railroad company, could not be classified and of public policy. Judson on Taxation, pp. taxed in any different manner from lands 563, 564, 592. The power of the state to owned by an individual, otherwise such clas-distinguish, select, and classify objects of sification would be purely arbitrary, and the taxation has a wide range of discretion. taxation in that way would be illegal; that The classification must be reasonable, but no earnings arose from those lands, because there is no precise rule of reasonableness, the earnings upon which the tax was assess- and there cannot be an exact exclusion or ed were by the terms of the act restricted to inclusion of persons and things. Cooley on "the gross earnings arising from Taxation, pp. 76, 77. The principle thus anthe operating of said railroad, and such earn- nounced, differing only in the form of expresings were not created by, nor did they arise sion, was followed in Pacific Express Co. v. from, nor were they in any way connected Seibert, 142 U. S. 351, 12 Sup. Ct. 250, with, these lands." It was held that at the 35 L. Ed. 1035; Magoun v. Illinois Trust & time these lands were so closely connected Savings Bank, 170 U. S. 296, 18 Sup. Ct. with the railroad, its construction and op- 594, 42 L. Ed. 1037. The rule, however, is eration, as, in effect, to be part and parcel not without its limitations, for it is equally thereof; that they made the gross earnings well settled that the classification must alpossible, upon the same principle that they partly issued out of the right of way, the ways rest upon some difference which bears a reasonable and just relation to the act, in roadbed, the track, cars, engines, tanks, and respect to which the classification is proother confessedly "railroad property." posed, and can never be made arbitrarily the course of the opinion it is said: "Although the act here provides for taxation of the gross earnings arising from the operation of the road, the phrase means earnings which arise because of its operation. The road is in operation, and the earnings which it is thereby enabled to make are to be taxed. Property which the company owns, and which has enabled and continues to enable it to operate its road, is part of the property from which the earnings arise by reason of such operation, and is within the meaning of the act. These lands are of this description. Although they are not taxed directly, yet the same is true of the right of way, the roadbed, the engines, cars, and water tanks, without which the road could not be operated. In substance, it must be said that without the existence of all the various pieces of property just enumerated gross earnings would be quite impossible. It is also true in regard to these lands. * And, looking at those facts, we see that unquestionably these lands have indirectly contributed to the gross earnings derived from operating the road, and that such earnings have arisen and been made possible by reason of the lands. They have not only aided in making these gross earnings possible, but they have formed, and still do form, a material fact in the combination of circumstances contributing to the construction of the railroad, to its operation, and to its earnings." [4, 5] Concerning the right of the Legislature to classify objects of taxation, it may be said the power is one that must be exercised subject to the restrictions of the state Constitution. This power in the Legislature is expressly recognized in our organic law, and authority given to fix the valuation of different classes by different means or methods (section 22, art. 10), but with the limitation "that taxes shall be uniform upon the

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and without any such basis. Is the present act, levying one rate of tax on oil and gas, and a lesser rate on ores bearing lead, zinc, jack, gold, silver, copper, or asphalt, and which omits a gross production tax on coal, in conflict with this rule? Clearly it is not. That mining property or the business of mining may be placed in a class by itself and taxed by some method peculiarly appropriate to that class is a valid exercise of a constitutional right on the part of the Legislature, and needs the citation of no authorities in its support. Equally well settled is the rule that it is competent for the Legislature to arrange and divide the various subjects of taxation into distinct classes, provided the tax is uniform upon all those belonging to the same class, and upon which it operates. Commonwealth

V. Germania Brewing Co., 145 Pa. 83, 22 Atl. 240; People ex rel. Iron Silver Mining Co. v. Henderson, 12 Colo. 369, 21 Pac. 144; People ex rel. Hatch v. Reardon, 184 N. Y. 431, 77 N. E. 970, 8 L. R. A. (N. S.) 314, 112 Am. St. Rep. 628, 6 Ann. Cas. 515; note to Bacon v. Board of State Tax Com'rs, 126 Mich. 22, 85 N. W. 307, 60 L R. A. 339 et seq., 86 Am. St. Rep. 524; Glascow v. Rowse, 43 Mo. 479; Gatlin v. Tarboro, 78 N. C. 119; Metropolitan St. R. Co. v. New York, 199 U. S. 1, 47, 25 Sup. Ct. 705, 50 L. Ed. 65, 4 Ann. Cas. 381.

[6-9] To justify judicial interference, the right to classify being a legislative function, the classification adopted must be based on

(Okl

difference with reference to the subject of, 18 Sup. Ct. 594, 42 L. Ed. 1037, 1042; Souththe tax. Unless this appears, the courts will western Oil Co. v. Texas, 217 U. S. 114, 121, not declare the classification void, though it et seq., 30 Sup. Ct. 496, 54 L. Ed. 688, 692." may not meet their approval. There are, in fact, many good reasons for making the clas- said that the tax was, in substance as well Again, in the course of the opinion, it was sification adopted by the Legislature. The as in form, an excise or privilege tax; that nature and character of oil and gas, their its reasonableness, unless some federal right relation one to the other in the natural state, be violated, was within the discretion of the means of discovery, kind of labor employed, state Legislature; that it had already been and cost of production and marketing fur- seen that the classification adopted could not nish good and sufficient reasons for the levy be deemed illusory; that is, that there was of a tax greater in amount than a tax of a no apparent violation of the equality provi like character placed on lead, zinc, and the sions of the state Constitution, or of the other mineral ores named in the act. Nor "equal protection" clause of the Fourteenth does the omission of coal from the imposi- Amendment, although railroad and pipe line tion of a production tax affect the statute. companies were required to pay at the rate of It should be kept in mind that the tax is not 4 per cent. of their annual intrastate earnon the property, but, instead, upon the busi-ings, while other public service corporations ness or occupation. Producers of oil and gas paid a less percentage. Authorities in harin the state are not therefore arbitrarily dis-mony with those cited are numerous. Among criminated against, contrary to the uniform- them are Connolly v. Union Sewer Pipe Co., ity clause of the Constitution, by the tax im- 184 U. S. 540, 562, 22 Sup. Ct. 431, 46 L. Ed. posed upon the value of their gross produc- 679; Armour Packing Co. v. Lacy, 200 U. S. tion, because it does not include the produc- 226, 235, 26 Sup. Ct. 232, 50 L. Ed. 451; Peotion of all minerals, or because those which ple ex rel. Hatch v. Reardon, supra; Braun it does include are not taxed at the same et al. v. Chicago, 110 Ill. 186; Maine v. Westrate. In the Ohio Tax Cases (Ohio River & ern U. Tel. Co., 73 Me. 518. The principles of Western R. Co. v. Dittey et al., 232 U. S. 586, equality and uniformity do not require the 34 Sup. Ct. 372, 58 L. Ed. 737) it was urged equal taxation of all pursuits or classes of that the act of the Ohio Legislature arbi- business, nor prevent the Legislature from trarily discriminated against the plaintiffs in taxing some kinds of business, while omiterror and other railroad companies, in that it ting others; but only that the burden of taxadid not include all other public utilities cartion shall be imposed equally upon all those rying on business within the state, those engaged in the same avocation, or, as providomitted, it was said being grain elevators, ed by our Constitution, "upon the same class stockyards, ferries, bridge companies, and innof subjects." Rhinehart v. State, 121 Tenn. keepers, and that the law did not operate uni- 420, 117 S. W. 508, 17 Ann. Cas. 254; State formly among the utilities that were taxed, V. Galveston, H. & S. K. Co., 100 Tex. 157, 97 since on electric light, gas, natural gas, S. W. 71; Kehrer v. Stewart, 197 U. S. 60, 25 waterworks, telephone, messenger or signal, Sup. Ct. 403, 47 L. Ed. 663; Kittanning Coal union depot, heating, coaling, and water Co. v. Commonwealth, 79 Pa. 100; 37 Cyc. transportation companies the tax amounted 732. A rule requiring that all kinds of busito 1.2 per cent. of gross intrastate receipts, ness be included within some class made the as to suburban and interurban railroads it subject of taxation as authorized in section was fixed at 1.2 per cent. of gross intrastate 12, art. 10, of the Constitution, would deearnings, and on express and telephone com- prive the state of its right to select its subpanies it was 2 per cent., while on railroads,jects of taxation and be in violation of secincluding plaintiffs in error, it was 4 per cent. tion 13, art. 10, of the Constitution. of such earnings, and the same on pipe line companies. With regard to the contention that the statute violated both the "uniformity" clause of the state Constitution and the "equal protection" clause of the Fourteenth Amendment, the opinion reads:

[10, 11] The objection is made that the act is in violation of section 19, art. 10, Constitution, in that, being an act levying a tax, it fails to specify distinctly the purpose for which the tax is levied. The act is not an exercise of the police power, but is, instead, a "Both of these contentions turn upon the fa- revenue measure. Binion v. Oklahoma Gas & miliar question of classification, concerning Electric Co., 28 Okl. 356, 114 Pac. 1096. Secwhich so much has been written. with the court below that whether the question 180 of the Constitution of Kentucky 1891, exWe agree tion 19 of article 10 is identical with section be considered in view of the uniformity and equality provisions of the Ohio Constitution, or cept that the latter has an additional proviof the equal protection' clause of the Four- sion giving to the General Assembly the powteenth Amendment, the result is the same; it er to authorize counties, cities, or towns to cannot be said that the classification rests upon levy a poll tax; in fact, it is said that the no reasonable and sufficient basis of distinction. State ex rel. Taylor v. Guilbert, 70 Ohio above provision of our Constitution was takSt. 253, 71 N. E. 636, 1 Ann. Cas. 25; Ken- en from the Kentucky Constitution. tucky R. Tax Cases, 115 U. S. 321, 337, 6 Sup. provision of our Constitution was before the Ct. 57, 29 L. Ed. 414, 419; Bell's Gap R. Co. court in McGannon, Adm'x, v. Trapp, AudiThis v. Pennsylvania, 134 U. S. 232, 237, 10 Sup. Ct. 533, 33 L. Ed. 892. 895: Magoun v. Illtor, 33 Okl. 145, 124 Pac. 1063, Ann. Cas. inois Trust & Sav. Bank, 170 U. S. 283, 293, 1914B, 620, where it was held that it did