Associated Grocers of Ala., Inc. v. Haden

• Decision Date: 02 March 1961
• Docket Number: 3 Div. 898
• Citation: 127 So.2d 624,271 Ala. 654
• Parties: ASSOCIATED GROCERS OF ALABAMA, INC. v. Harry H. HADEN, Commissioner of Revenue.
• Court: Alabama Supreme Court

Page 624

127 So.2d 624

271 Ala. 654

ASSOCIATED GROCERS OF ALABAMA, INC. v. Harry H. HADEN, Commissioner of Revenue.

3 Div. 898.

Supreme Court of Alabama.

March 2, 1961.

M. R. Nacham, Jr., Steiner, Crum & Baker, Montgomery, and Neil Metcalf, Geneva, for appellant.

MacDonald Gallion, Atty. Gen., Guy Sparks, Sp. Asst. Atty. Gen. and Wm. H. Burton, Asst. Atty. Gen., for appellee.

Thos. B. Hill, Jr., Wm. A. Oldacre and Hill, Hill, Stovall & Carter, Montgomery, amici curiae.

SIMPSON, Justice.

This appeal challenges the final decree rendered by the Montgomery County Circuit Court, In equity, in a declaratory judgment proceeding wherein appellant by its bill of complaint sought a declaration of rights that it was a wholesale dealer or jobber under § 730, Title 51, Code 1940, and was entitled to purchase state tobacco tax stamps at a discount under § 728, Title 51, Code 1940, and under Permit Number 416 issued to it by the State Department of Revenue.

The court decreed that appellant was an association, collection, or combine of retailers bound together as, and possessing all the characteristics of, a co-operative being owned, controlled, managed and operated by and for retailers as their purchasing agent and not a wholesale dealer or jobber within the meaning of said § 730; that the issuance of a tobacco stamping permit can be revoked when erroneously issued to any person, firm, corporation or association not a wholesale dealer or jobber within the meaning of § 730, Title 51 Code 1940, and the said Permit Number 416 was erroneously issued.

On November 26, 1958 the State Department of Revenue issued appellant tobacco stamp Permit Number 416 as a wholesale dealer or jobber which entitled appellant to purchase tax stamps for tobacco products at a 7 1/2% discount. On June 22, 1959, the State Department of Revenue gave notice to appellant that this permit had been erroneously issued because appellant was not a wholesale dealer or jobber of tobacco products within the meaning of § 730 and was notified to appear before the Department of Revenue and show cause why its permit should not be revoked. Thereafter, appellant filed its bill and the ensuing decree resulted in this appeal.

It is necessary first to understand the true nature of appellant's organization and operation. Appellant was organized to engage in the wholesale grocery business upon the terms and conditions as it selected. Appellant is a co-operative retailer-owned werehouse distributing unit. Only one place of business, the warehouse establishment, is owned and operated by the corporation. There is no retail outlet on the premises where the wholesale function is located, nor does appellant operate or manage any retail establishment. The function of appellant's warehouse unit is to purchase merchandise in quantities from producers, store it, and sell the goods at wholesale prices pursuant to individual orders of the member retail grocers. The present membership appears to be around one hundred and thirty-five and represents individually owned and operated supermarkets and grocers, all of which sell tobacco products at retail.

Stock ownership in appellant, which is the basis for membership, is restricted to retail food merchants. An applicant to become a member must be approved by the board of directors, and upon election to membership, must subscribe to seven and one-half shares of capital stock at one hundred dollars per share. Each member or stockholder has one and only one vote at stockholder meetings. Each member of the board of directors is a stockholder and member and retail food merchant.

Patronage dividends, which are returned profits to members of the appellant association earned during the preceding fiscal year, determined in proportion to the total amount of purchases by the member from the appellant association to the total amount of profits to be refunded, were stricken in the year 1959. Patronage dividends were computed on profits to June 27, 1958 and were paid in 1958. None were paid thereafter. No other change has been made in the method of operation. Various types of credit memos are received by each member of Associated Grocers. The amount of the credit varies but it is in proportion to the monetary amount of groceries and tobacco products each member purchases in the preceding fiscal period. One covers tobacco; another is for spoilage or operational breakage and loss; another is for advertising and promotion; and there are others. All of these credit memos are declared from the profits of sales to members retail merchants.

As stated, appellant, a corporation, is a co-operative retailer-owned grocers warehouse unit which sells groceries and tobacco products in large quantities to member retail merchants at wholesale prices for sale at retail to the ultimate consumer--the general public.

The applicable provisions of our statute are here set out:

Title 51, § 728, Code 1940. '* * * When wholesalers or jobbers have qualified as such with the department of revenue as provided in section 730 of this title, and desire to purchase stamps as prescribed herein for use on taxable tobaccos sold and delivered by them, the department of revenue shall allow on such sales of tobacco tax stamps a discount of seven and one-half percent (7 1/2%) on the entire amount of the sale. * * *'

Title 51, § 730, Code 1940. 'The phrase 'wholesale dealer and jobber,' as used in this subdivision shall include persons, firms, or corporations who shall sell at wholesale only any one or more of the articles taxed herein to licensed retail dealers for the purpose of resale only. The phrase 'retail dealer', shall include every person, firm or corporation other than a wholesale dealer, as defined in this section, who shall sell or offer for sale any one or more of the articles taxed herein, irrespective of the quantity or amount, or the number of sales; and all persons operating under a retail dealer's license. The word 'stamps', as used herein means the stamp or stamps by the use of which the tax levied under this subdivision is paid and shall be designated Alabama revenue stamps. * * * No person, firm, corporation, association or co-partnership operating more than one retail store or mercantile establishment within this state under the same ownership, supervision or management, or operating a wholesale and retail business under the same roof, shall be included within the meaning of the words, 'wholesaler or jobber', as the same are used in this subdivision. * * * The department of revenue may at any time revoke the permit issued to any wholesaler as hereinabove provided who shall be guilty of violating any of the provisions of this chapter, or any of the rules of the department of revenue adopted and promulgated under authority of this subdivision, and refuse to sell any wholesaler or jobber, any stamps until such time as his permit shall be restored.' (Emphasis supplied.)

Due regard must be...